BENEFITS DIGEST

A former employee's class action against Lithia Motors over its $1 billion 401(k) plan produced a split ruling last Wednesday. The claims that the plan paid Merrill Lynch excessive recordkeeping fees survive, both as fiduciary breaches and as prohibited transactions with a party in interest, along with a claim that Lithia failed to monitor those fees. The theory that using forfeited employer contributions to reduce future company contributions violates ERISA is gone for good. The court called it novel and unsupported by present law, refused any amendment, and dropped a footnote cataloging the near-identical complaints the same plaintiffs' firm has filed elsewhere. A challenge to the plan's switch from mutual funds to collective investment trusts also failed, for lack of any concrete injury.

The stable value litigation wave picked up another survivor last Wednesday, in a ruling that teaches two lessons at once. A former Penn State Health employee had signed a severance release, and the court enforced it, dismissing his individual and class claims. But a release cannot waive claims brought on a plan's own behalf, so his derivative claims proceed. Those claims allege the fiduciaries kept an underperforming Great-West guaranteed investment contract while paying the same insurer recordkeeping fees 224% higher than average, and let forfeitures offset nearly twelve million dollars of the employer's own contributions without accounting for the conflict of interest. That loyalty theory survived where other forfeiture suits keep failing because it attacks the self-interested exercise of discretion, not the practice itself. The court also rejected an industry amicus attack on the complaint's comparator funds, holding that perfect comparators are not required at the pleading stage.

Sanford Heisler Sharp McKnight filed suit in the Eastern District of Virginia claiming CGI Technologies plan fiduciaries kept the Columbia Trust Focused Large Cap Growth Fund despite trailing the Russell 1000 Growth by more than 61 percentage points from September 2020 through February 2026, with alleged losses of $168 million in a plan of more than 17,000 participants. The complaint points to over $350 million in net outflows from 2021 to 2024, and the filing joins this year's underperformance wave alongside suits against Parsons and American Express.

The 401(k) Specialist write-up adds the retention timeline, alleging the fund stayed on the menu for nearly 12 years despite persistent underperformance and significant asset outflows, and situates the filing in Sanford Heisler's run of ERISA class actions following its UnitedHealth and General Electric settlements.

This week's roundup, a short-handed edition with no case of the week, flags two decisions as most notable. In Central States v. McClain the Seventh Circuit held that Arkansas's latest pharmacy benefit manager regulation survives ERISA preemption, and in Liu v. Kaiser the Ninth Circuit extended the substantial compliance doctrine to benefit elections. The edition also collects the week's decisions on arbitration, attorneys' fees, fiduciary breach, disability claims, preemption, exhaustion, and pleading.

In an unpublished decision, the Ninth Circuit vacated class certification in an ERISA fee case involving a defined contribution plan, finding the district court failed to rigorously analyze whether Rule 23's typicality and adequacy requirements were satisfied, and remanded.

A unit of American Family Insurance and two co-insurers do not have to cover a $40 million settlement paid by a retirement plan administrator accused of failing to catch a years-long fraud scheme carried out by a church executive, a California federal court ruled Thursday.

The Prudent Investment Fiduciary Rules blog proposes a quantitative framework for documenting fiduciary prudence, combining cost-comparison metrics with AI-assisted process tools. Dense, but of interest to committees formalizing their prudence files.

The trade press catches up to Johnson v. Russell Investment Management, Tuesday's lead here: plaintiffs do not always need an apples-to-apples benchmark to plead imprudence.

ARA situates Johnson in the meaningful-benchmark line that has decided so many recent prudence cases: the Eleventh Circuit's answer is that not every claim needs one, a counterweight to this month's dismissals in Scholin and Hodges.

Roberts breaks down Johnson v. Russell Investment Management, Tuesday's lead: the Eleventh Circuit held a plaintiff need not always offer an apples-to-apples comparator to prove objective imprudence, and qualitative evidence like negative analyst ratings and a fund's unpopularity can carry the point on its own.

ARA's take on the 3M ruling that led Tuesday's issue: a fiduciary-breach suit dismissed for lack of a meaningful benchmark got a second chance with the Fidelity Freedom suite as comparator, and made the most of it.

In a published opinion, the Eleventh Circuit reversed summary judgment for Royal Caribbean in the imprudence suit over its proprietary Russell target-date funds, holding that a plaintiff need not identify an apples-to-apples comparator to establish objective imprudence in every case. Qualitative evidence such as a fund's unpopularity and negative analyst ratings can carry the point, and a fund's own custom benchmark is not automatically the only proper measuring stick when the plaintiff's theory is that the benchmark's built-in features are what made the fund imprudent.

A Minnesota federal judge allowed target-date imprudence and self-dealing claims against 3M to proceed after finding the amended complaint's Fidelity Freedom fund comparison a meaningful benchmark, while narrowing other theories. The suit was dismissed this spring with leave to amend for exactly this deficiency, so the ruling shows what a benchmark allegation that works actually looks like.

Judge Gilliam granted preliminary approval of a $13 million settlement resolving ERISA fiduciary-breach and benefit-denial claims by 220 former Atmel employees over severance under the Atmel U.S. Severance Guarantee Benefit Program: $9.5 million to the class plus $3.5 million in fees, reported to deliver 80 to 100 percent of unpaid severance with interest.

The full picture on the Alcoa decision the Digest flagged Monday: Roberts walks through the Seventh Circuit's holding that the CBAs' silence on benefit duration supports class treatment of 3,000-plus pre-1993 retirees, while the judicial-estoppel basis for the retirees' summary judgment win could not stand.

In Klawonn v. Motion Picture Industry Pension Plans, the Ninth Circuit vacated summary judgment for the fiduciaries and sent the case back for evaluation under Anderson v. Intel's prospective-methods standard: prudence is judged by the methods fiduciaries employed, not by whether underperformance was substantial and consistent.

More than 3,000 pre-1993 Alcoa retirees sued when the company terminated their lifetime retiree healthcare benefits in 2021. On Friday the Seventh Circuit affirmed class certification, holding that the collective bargaining agreements' silence on benefit duration lets the retirees prove vesting through common evidence, but reversed the summary judgment they had won below, rejecting the district court's judicial-estoppel theory and returning the vesting question to the merits. (Blurb corrected 8/17: an earlier version mischaracterized the dispute as a pension-calculation challenge.)

A new complaint alleges fiduciaries selected underperforming target-date funds, and industry observers read it as a warning shot at wealth firms converging on the retirement plan arena. Fiduciary litigation following the money into the advisory consolidation wave.

Another voice joins the post-Genworth chorus the Digest has been tracking: Holland & Hart on why the era of stipulated or rubber-stamped class certification in 401(k) fiduciary litigation is ending, and how sponsors should adjust their defense posture.

one of the largest 401(k) fee settlements on record, and a checklist of the oversight practices that were alleged to be missing.

Class actions aggregating employee claims against 401(k) plans are big litigation, with gross settlements exceeding $500 million since 2021. Bradley on how the Fourth Circuit's certification reasoning arms defendants, the latest entry in the class-certification story that led yesterday's Digest.

Encore's fiduciary team surveys the fallout from the Fourth Circuit's Genworth decision calling out the rubber-stamping of broad ERISA classes, and argues the era of automatic certification is ending. The latest chapter in the class-certification story the Digest has followed since the decision came down.

Watkins applies his terminal-wealth breakeven framework to in-plan annuities, arguing that fiduciaries weighing guaranteed-income options should quantify what participants trade away for the guarantee rather than rest on qualitative prudence claims.

The DOL’s proposed prudence safe harbor regulations have pretty much made it “table stakes” for some responsible person somewhere to read and understand any annuity contracts on behalf of the plan which are provided as part of any DC lifetime income program.

Though the plan document appeared to require arbitration in pursuing recovery in a fiduciary breach suit, a federal appellate court has affirmed a district court decision rebuffing that requirement.

Modern portfolio construction has historically emphasized maximizing expected returns for a given level of risk.

At a Glance This decision affirms some key ERISA concepts that fiduciary committee members should consider and defendants should emphasize in nearly every lawsuit alleging fiduciary imprudence. The most important principle is that ER.

The ADP fiduciary committee will review its retirement plan’s target-date funds as part of the settlement.

The U.S. Court of Appeals for the Fourth Circuit recently declined to rehear its decision vacating certification of a mandatory class under Federal Rule of Civil Procedure 23(b)(1) in Trauernicht v. Genworth Financial Inc. The Court held that fiduciary-breach claims under the Employee Retirement Income Security Act of

In Munoz v. Alorica, Inc., No. 25-7359, 2026 WL 2199195 (9th Cir. July 30, 2026), former participants in the Alorica 401(K) Retirement Plan brought this action under ERISA on behalf of a putative class.

The Department of Labor urged the court to reject fiduciary breach claims, arguing the plaintiffs’ theory threatens employer flexibility and retirement plan sponsorship.

In Raya v. Barka, No. 25-2394, __ F.4th __, 2026 WL 2168772 (9th Cir. July 28, 2026), Plaintiff sued his former employer, Calbiotech, Inc., several individual defendants, and Calbiotech’s 401(k) Profit Sharing Plan and Pension Plan, asserting ERISA claims for denial of benefits, breach of fiduciary duty.

Former employees at American Express (Amex) have filed suit alleging that the credit card company maintained underperforming funds in its 401(k) plan, including target-date funds (TDFs).

That changed in late 2025, when four putative class actions were filed against large employers and their benefits consultants. The cases seek to apply now all-too-familiar retirement plan excessive fee theories to voluntary insurance products.

NCR Corp. has settled a class action lawsuit for almost $48 million. The five former executives and their spouses who filed the Employee Retirement Income Security Act (ERISA) suit claimed that the software company failed to provide them with lifetime annuity payments, contrary to its promises.

Jim Watkins’ recent article on fiduciary prudence protocols is one of the best practical guides I have seen for investment committees. It is written as a roadmap for plan sponsors who genuinely want to satisfy ERISA’s prudence requirements before selecting an investment.

Over the past several years I’ve worked as an investment expert with ERISA plaintiff law firms helping investigate and file more than 40 fixed annuity excessive fee and prohibited transaction lawsuits. Just Scratching the Surface.

The deal, if approved by a federal district court in California, would require updates to future pension calculations.

They really should be fully understood by the fiduciaries involved in the selection and maintenance any lifetime income program, especially if one is attempting to comply with the DOL’s proposed prudence safe harbor.

The Third Circuit’s decision in Johnson v. Quest Diagnostics, Inc. was a recent bright spot for ERISA litigation in a sea of mostly depressing news. The plaintiffs in the Quest case brought suit alleging that the retention of two underperforming actively managed funds in Quest’s 401(k) plan was a fiduciary breach.

The organization’s amicus brief backed Intel and warned that allowing lawsuits based on hindsight would fuel costly litigation and harm 401(k) participants.

Amicus briefs by the Department of Labor and the employer group warned the Supreme Court to not allow lawsuits under ERISA based solely on an investment fund’s underperformance.

The company argues that claims of underperformance should be judged against a meaningful, comparable benchmark.

EBSA sent its replacement for the 2022 Biden-era ESG rule to OIRA on June 30, 2026; agenda target release July 2026. Expected to restrict fiduciary consideration of climate/social factors under the

The Third Circuit affirmed summary judgment for a 401(k) plan sponsor in In re Quest Diagnostics ERISA Litigation, holding that ERISA's duty of prudence is a process-based inquiry. A sound fiduciary process, not investment results, defeats a breach claim, and permissive investment-policy-statement language preserved the committee's discretion to retain underperforming funds.