How Not to Get Sued in 2026: Part 1

Even the most well-intentioned plan sponsors and advisors have recently found themselves on the receiving end of multimillion dollar lawsuits challenging the costs associated with the 401(k) plans they promote. A return to the basics of fiduciary responsibility and a more proactive stance can help temper the potential of legal action.

And with a new Employee Benefits Security Administration sheriff in town and a series of recent, industry-friendly announcements from the Department of Labor pushing back against increasingly expensive retirement litigation, the momentum of these cases may begin to shift.

• EDITOR’S NOTE: Welcome to the 401(k) Specialist “DeepDive,” a brand-new collection of exclusive quarterly content dedicated to exploring key topics of interest to retirement plan advisors and the 401(k) community from a variety of angles and formats. We’re kicking it off with “How Not to Get Sued,” examining why fiduciary lawsuits persist, how plaintiffs build their cases, and—most importantly—what advisors and sponsors can do to reduce litigation risk without abandoning innovation or participant outcomes.

The man in the lawsuit spotlight

A decade ago, when 401(k) Specialist profiled Jerry Schlichter, the maverick Missouri attorney was something of an outlier, viewed with cautious suspicion by the industry. Schlichter, founder and co-managing partner of Schlichter Bogard, had used his legal tenacity to expose what courts agreed were excessive fees in major 401(k) plans, most notably his $13.2 million settlement for plaintiffs in the 2015 Tibble v. Edison case.

In 2026, Schlichter now has three high-profile Supreme Court ERISA wins under his belt—a series of even more impactful excessive-fee cases, including the 2022 ruling over Northwestern University’s retirement plan (Hughes v. Northwestern), and last April’s similar judgement in his case against Cornell University’s plan (Cunningham v. Cornell). And with a slate of new, voluntary benefits-based cases already filed this January, the St. Louis-based firm is, perhaps rightfully, every plan sponsor and advisor’s worst nightmare come true—especially as courts have sided with the firm, over and over again.

As the soft-spoken Schlichter explained in a recent interview with 401(k) Specialist, his was the first law firm to test the waters of 401(k) litigation. Judgements in his favor, to the tune of $1.5 billion in direct and cost-related rewards to participants, have put the industry into a defensive posture—something almost unthinkable during the first three decades of the 401(k) plan’s debut and growth.

“When we filed the original cases, there had never been one involving any of the 600,000 401(k) plans in America. We were alone in the wilderness for years,” he says. “We’re the only three cases in the Supreme Court that have ever taken place in that space, and they’re not only victories, but having unanimous decisions in all three cases. In the last one, Justice Alito mentioned the firm name in the oral argument … so I think they do recognize our firm.”

Schlichter is also no longer alone, as more and more lawsuits involving excessive fees, fiduciary mismanagement and forfeiture of benefits have shaken the retirement industry to the core. Sanford Heisler Sharp McKnight has been equally active in the ERISA litigation space, with a recent $69 million settlement in its case against UnitedHealth Group’s 401(k) plan and a $61 million win against General Electric. A new $70 million class action suit was filed Jan. 29 against Bloomberg, citing underperforming investments in its $5 billion retirement holdings.

“After we began making headway in that space, as numerous federal judges have said, the resulting legislation has brought fees down in the industry by over $2.8 billion annually. So that’s a great thing for American workers and retirees.”

Jerry Schlichter

In Schlichter’s eyes, and those of his clients, his campaign has sought to correct the injustices of retirement plans that long went willfully unmanaged, with employees’ life savings being siphoned off to cover expenses—or worse. It’s an unfair blanket characterization, but the narrative has worked in the courtroom so far, and his wins have put a renewed focus on plan fiduciary responsibilities.

“After we began making headway in that space, as numerous federal judges have said, the resulting legislation has brought fees down in the industry by over $2.8 billion annually. So that’s a great thing for American workers and retirees. For any lawyer advising a 401(k) sponsor, they wouldn’t be doing their job if they didn’t affirmatively tell [their client] that,” he said.

“They have to take their job seriously, unlike how it was when we began this journey,” Schlichter adds. “Some plan sponsors think that it’s sort of a routine process to be a fiduciary in a 401(k) plan. To the contrary, it’s very serious role.”

Lawsuits focus on long-term employee success

Charles Field, co-chair of Sanford Heisler Sharp McKnight’s ERISA practice, tells 401(k) Specialist he watched Schlichter’s early successes and started his practice with a focus on investment performance, and better employee outcomes.

“My goal was to bring positive change to the way that fiduciaries manage their employees’ money,” he says. “Retirement savings is a big deal, and the lives and welfare of millions and millions of people depend on fiduciaries managing that money responsibly.”

Field says his most recent case continues that trend, as a plan sponsor did not remove investment options despite an extensive track record of low returns. He says that wasn’t especially hard to demonstrate, as it was all based on public records.

“In our Bloomberg filing, we noticed that two funds had underperformed for 10 to 15 years. Fifteen basis points over an employee’s lifetime career investments might reduce their savings by $100,000 or more. That’s a big deal. So that’s where we stepped in. Those employees rely on their employer to provide a state-of-the-art plan that has good investment options with low fees, and stellar investment performance.”

Somewhat defiantly, Schlichter says he’s worked hard to earn his present feared-and-admired reputation. Especially, he says, if it prompts advisors and plan sponsors to think much more seriously about the fine print in their documents, the way that revenue-sharing takes place and the appropriateness of every moving part in a plan.

“Having lived with the massive risk and opposition for years and years, filing these cases with no legal precedents, the gratification is greater because of that struggle. There’s certainly a reason why lawyers didn’t bring these cases, but I believed that it was something that deserved attention and correction. The fact now that the whole industry has been changed is extremely personally gratifying. It’s why I went into the practice of law, to make a difference in people’s lives.”

A regulatory response is brewing

Unlike the “Wild West” situation back in the mid-teens, retirement plan litigation is no longer uncharted territory. While many initial ERISA suits might have simply been dismissed as being unfounded or speculative in their claims, Schlichter’s repeated successes have helped push dozens of subsequent cases into the discovery stage. Or, increasingly, they have produced massive out-of-court settlements, as plan sponsors and insurers hope to avoid lengthy and potentially more-expensive trial outcomes.

His successes also contributed to an increasingly litigious environment that’s captured the attention of both EBSA and the Department of Labor. Schlichter’s track record has become a focus of opposition by that aforementioned “new sheriff” at EBSA—Trump administration appointee Daniel Aronowitz, the Assistant Secretary of Labor. Along with a growing slate of industry-friendly rhetoric and a series of amicus briefs filed by the traditionally at-arms-length DOL, Aronowitz has publicly vowed to use his time in the EBSA post to clamp down on these wins and other current cases, part of what he’s called a flurry of “frivolous” retirement plan lawsuits.

A preventative re-focus on the basics

In the meantime, it sure looks as though plaintiffs still have the upper hand. Given the turbulent dynamic and the increasingly costly world of retirement plan litigation, what can advisors and plan sponsors do to make sure to better guarantee they don’t end up on the receiving end of a Schlichter-inspired suit?

“When I talk to retirement plan clients, I tell them there are two distinct levels of risk: the risk of being sued, and the risk of being held liable for a prohibited transaction claim.”

Matthew Hickman, J.D.

According to ERISA attorneys Matthew Eickman, J.D., managing partner with Fiduciary Law Center, and George Sepsakos, principal with Washington D.C.’s Groom Law Group, the secret involves a renewed concentration on the most foundational aspects of the fiduciary role: looking out for participants’ best interests above all else.

Committing to openness and clarity in every aspect of plan management, documentation, fee structures and asset management, as well as committing to better communication, will all go a long way in keeping participants happy, and avoiding the specter of yet another class-action suit, they say.

“When I talk to retirement plan clients, I tell them there are two distinct levels of risk: the risk of being sued, and the risk of being held liable for a prohibited transaction claim,” Eickman says. “You need to be aware of what 408(b)(2) says and have done your due diligence so you can show that the fees paid by participants are reasonable.”

More than just a perfunctory gesture, Sepsakos says fiduciary responsibility requires increased scrutiny on the basics of plan operations, as ambitious attorneys are actively looking for any flaws in the fine print.

“You need a solid understanding of what the plan document allows for and the rules of the road. That governs your role as a fiduciary,” Sepsakos adds. “Plus, you need to understand the landscape on the investment side, how it’s potentially changing, and be aware of how the courts are interpreting these things.”

Eickman says the success of recent cases has also changed the landscape, as attorneys know what flies in retirement plan suits, and what remains untested.

“Ten years ago, if you asked what fiduciaries should do to protect themselves, you would just get some ERISA attorneys’ opinions,” he says. “Now, we base it on what the courts are telling us, and that’s a significant difference—so we have to give some credit to Jerry Schlichter. More cases are reaching discovery, which has led to more substantive rulings from courts.”

The most successful guardrail, they say, is ensuring that documentation, oversight and active management are all clearly stipulated. Courts have, over and over again, demonstrated that they favor process over performance, and both Eickman and Sepsakos say an increased and publicly visible emphasis on oversight and participant-focused strategies can help rebuild trust among plan sponsors, and employees themselves.

The most common legal pitfalls

Legal judgements, especially those in Schlichter’s precedent-setting cases, have most typically fallen into the realm of claims of excessive fees and faulty recordkeeping.

Attorneys have built a growing body of case law questioning the validity of retirement plan fees, and have used those arguments to pursue plan sponsors for violating their fiduciary duties. The primary legal tactic cites a failure to prudently select and monitor both investments and service providers, resulting in unnecessarily high recordkeeping and management fees.

In cases such as Schlichter’s trifecta of wins, courts have focused less on the specifics of fees themselves and instead on process: did fiduciaries follow a documented, thoughtful and ongoing decision-making path in their decisions and choices?

A second legal focus has been on imprudent investment. While participants hope that their millions of dollars of investments are closely monitored and managed for maximum return, the advent of “set it and forget it” investment strategies has created a ripe target for legal speculation.

These cases have typically alleged that fiduciaries kept underperforming, overly expensive or inappropriate investments in their plan menus, when better, lower-cost alternatives were available. Plaintiffs have relied on performance benchmarks, peer-group comparisons and fee data to argue that fiduciaries failed to act in their best interest. Plans that have been set on virtual autopilot have faced the biggest repercussions, Eickman points out.

“It’s become a very common lawsuit, saying that you used a more expensive investment option than you needed,” Eickman says. “That’s not just active versus passive investment, but that you also used all that revenue to pay for the recordkeeping expenses. Then, because it was working, you didn’t investigate those costs, but if you did, you’d realize they were too expensive. You breached your duty of prudence, and, oh, by the way, not only is that a fiduciary breach, it’s a prohibited transaction.”

EDITOR’S NOTE: Part 2 of this feature explores emerging ERISA litigation trends—including forfeiture and voluntary benefits claims—while emphasizing the importance of documentation, oversight, and prudent process. It also examines shifting regulatory dynamics and offers practical steps fiduciaries can take to reduce litigation risk.

• Read How Not to Get Sued 2026: Part 2 at this link.

Andy Stonehouse is the primary author of this article, with additional research and reporting by 401(k) Specialist Editor-in-Chief Brian Anderson.