The increase in the number of ERISA lawsuits tops the current list of concerns to the workplace retirement plan industry, according to American Retirement Association CEO Brian Graff, who highlighted the issue during Monday’s opening general session of the 2025 NAPA 401(k) Summit in Las Vegas.
“One of the biggest concerns—frankly right now I think it’s the biggest concern for our industry and the plan sponsors is the ever-increasing proliferation of ERISA plan lawsuits,” Graff said. He went on to note that data from ARA’s Plan Sponsor Council of America shows one-third of large 401(k) plans and half of mega plans have faced such a lawsuit, and that there are numerous examples where these lawsuits are cut-and-paste filings where sometimes the trial lawyers even forget to correct the name of the plaintiff from the previous plan suit.
“They repeatedly say their No. 1 job as a plan sponsor is to not get sued,” Graff told the NAPA crowd. “We believe this fear is having a chilling effect on innovation in retirement plans—like lifetime income options.”
Indeed, several high-profile court decisions in recent months are combining to create this challenge facing the workplace retirement plan industry in 2025 by reshaping the risk landscape for plan sponsors, fiduciaries, and retirement service providers.
The sheer volume of ERISA litigation—covering breach of fiduciary duty issues such as excessive fees, investment selection, plan forfeitures and prohibited transactions—means that even small procedural missteps can expose plan sponsors to costly lawsuits, settlements, and reputational damage.
Many lawsuits today filed by law firms seeking out classes of plan participants aren’t just targeting “bad actors” but well-meaning plan sponsors who failed to document processes carefully enough, raising the legal bar for what constitutes prudent fiduciary behavior.
“A great many of these lawsuits are funded by venture capitalists who are making an excellent return on these cases,” Graff said, adding that the law firms are making one-third plus costs on these cases whereas participants on a per-participant basis aren’t getting very much at all.
“The reality is very much having—in our view—a negative effect on our industry and most importantly on the system to the detriment of plan innovation and participants,” Graff said.
Former Assistant Secretary of Labor for EBSA Preston Rutledge, on the main stage with Graff during the annual “From the Hill to the Summit” opening general session at the NAPA 401(k) Summit, noted that the recent Supreme Court decision in the Cornell case made it so that any time you hire a service provider, you’ve committed a prohibited transaction. “Sorry. That’s what it actually says,” Rutledge said, adding that it’s always been OK to commit a prohibited transaction as long as it’s exempt.
“I do think if you finish reading the case, the Supreme Court was kind of aware of what it was doing, and seemed to regret it, but seemed to feel like, ‘Tough—Now Congress has to do something about it,” Rutledge said.
Graff said the Supreme Court decision has basically created a climate where all plaintiffs have to do is allege a prohibited transaction, identify a party of interest, and as long as they are alleging that whatever exemption is being claimed has not been fully complied with, you’re going to go to discovery.
“The problem is now we’ve created a much more robust environment for these venture capitalists to fund lawsuits because regardless of the merits of the claim, when you go to discovery, it’s expensive,” Graff said. “You’re making it much more likely for plans to want to settle. Which is really what these guys want anyway, because this is all about making money.”
Fiduciary rule status
Graff and Rutledge also spoke about what’s next for the Department of Labor’s beleaguered fiduciary rule—formally known as the Retirement Security Rule—currently under a preliminary injunction sitting in the 5th Circuit. Rutledge noted that is the same court that overruled the Obama-era fiduciary rule.
With the Trump administration not expected to favor implementing the Biden-era fiduciary rule, Rutledge said it’s a “very favorable situation for the administration to let that run its course and see if the 5th Circuit will vacate the rule again.”
Rutledge mentioned that the Trump administration has gone to court three successive times to ask for 60-day extensions to respond to the appeal.
“Either they aren’t sure what they want to do or they’re waiting for the troops to arrive who really understand—it’s hard to know,” Rutledge said, as Assistant Secretary of Labor for EBSA Daniel Aronowitz awaits being confirmed to the position. But having the 5th Circuit vacate the rule seems appealing to the Trump administration.
“If anybody was to ask for my opinion, I’d say, you’ve got such a good chance to have the 5th Circuit vacate it—let that happen, and then you have really no choice but to take it out of the Federal Register,” he said, “and frankly the previous rule kind of springs back to life.”
The DOL finalized the latest iteration of the Retirement Security Rule in April 2024, seeking to expand the definition of an investment advice fiduciary under the Employee Retirement Income Security Act (ERISA). It aimed to ensure that financial advisors act in the best interests of retirement savers and was originally scheduled to take effect on Sept. 23, 2024.
In Sept. 2024, the DOL under previous pre-election leadership filed an appeal to reverse the two federal court stays that halted its Retirement Security Rule. Then in February as the Trump administration took over, the DOL began requesting the pauses in its appeal of the two stays issued to the rule. The pause was intended to allow the new DOL officials sufficient time to become familiar with the issues in the cases “and determine how they wish to proceed,” the Trump administration said at the time.
If the 5th Circuit does not vacate the Retirement Security Rule, the DOL could also opt to rescind or withdraw the rule.
The 2025 NAPA 401(k) Summit runs April 28-30 at Fontainebleau Las Vegas. This year’s event boasts record-breaking attendance of more than 3,000, with 1400+ advisors and 924 first-time attendees.
SEE ALSO:
• Walberg Calls for DOL to ‘Rescind or Withdraw’ Fiduciary Rule
• Supreme Court Supports Cornell Participants in ERISA Suit
• NAPA Takes Vegas in Annual 401(k) Summit
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.