Heightened Scrutiny: Employers Urged to Bolster Fiduciary Oversight Amid Surging ERISA Lawsuits

Against a backdrop of increasing lawsuits challenging employee benefits plans, employers are being strongly advised to enhance their oversight of third-party vendors and reinforce the internal processes that guide the execution of their fiduciary responsibilities. This critical counsel comes from legal experts observing a significant uptick in litigation related to the Employee Retirement Income Security Act (ERISA), a trend that underscores the evolving landscape of compliance and risk management for plan sponsors.

The litigation trend is starkly evident in the escalating number of class-action lawsuits alleging violations of ERISA. A recent analysis by Bloomberg Law, published last month, revealed a startling increase, with nearly 70 such claims filed during the first quarter of 2026. This figure represents an almost double the rate observed during the same timeframe in both 2025 and 2024, signaling a profound shift in the legal environment surrounding employee benefits. The implications of this surge are far-reaching, demanding immediate and comprehensive action from employers to mitigate potential liabilities and ensure the robust protection of plan participants’ interests.

Understanding ERISA: The Bedrock of Employee Benefit Protection

To fully grasp the current challenges, it’s essential to revisit the foundational principles of ERISA. Enacted in 1974, the Employee Retirement Income Security Act is a comprehensive federal law designed to protect the retirement and health benefits of private industry employees. Its primary objective is to set minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. ERISA mandates specific responsibilities for plan fiduciaries, requiring them to act solely in the interest of plan participants and their beneficiaries, with prudence, diligence, and loyalty.

A "fiduciary" under ERISA is broadly defined and can include any individual or entity that exercises discretionary authority or control over a plan’s management or assets, or renders investment advice for a fee. This often encompasses plan sponsors, members of benefits committees, trustees, and even certain third-party administrators. The core of fiduciary duty is the "prudent person" standard, which dictates that fiduciaries must act with the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. Failure to adhere to these stringent standards can expose fiduciaries to significant personal liability, making the current surge in lawsuits particularly alarming.

The Alarming Surge in ERISA Litigation: A Chronology of Intensification

The rapid acceleration of ERISA class actions is not merely a statistical anomaly but reflects a confluence of factors, including increased plaintiff attorney sophistication, evolving legal theories, and a heightened focus on plan fees and administrative practices. The Bloomberg Law report, highlighting the nearly 70 filings in Q1 2026, serves as a critical benchmark, illustrating a dramatic escalation from previous years. For context, if this pace continues, 2026 could see well over 200 new ERISA class actions, a number unprecedented in recent history.

This surge follows a period of steadily increasing litigation, particularly concerning excessive fees charged in 401(k) and 403(b) plans. What began with lawsuits targeting large institutional plans has now expanded to include smaller and mid-sized employers, as plaintiffs’ attorneys become more adept at identifying perceived weaknesses in plan administration and investment management. The legal theories are also becoming more nuanced, moving beyond simple fee comparisons to challenge broader aspects of fiduciary conduct, including vendor selection, monitoring, and the appropriate use of plan assets.

Specific Litigation Battlegrounds: Forfeitures and Voluntary Benefits

Anne Greene, a partner at Saul Ewing, highlights several areas that are frequently targeted in ERISA class actions, underscoring the complexities even for seasoned compliance teams. ERISA compliance can be a complicated function even without an uptick in lawsuits to worry about, especially given the pervasive role that vendors and third-party administrators play in benefits operations. As plan fiduciaries, employers have several responsibilities under ERISA, and robust vendor oversight is a key component of fulfilling these duties.

One prominent area of contention revolves around the use of plan forfeitures. Forfeitures occur when employees leave a plan before their employer contributions have fully vested. These unvested amounts remain within the plan. Plaintiffs are increasingly challenging scenarios where employers utilize these plan forfeitures to offset their own contributions, while simultaneously continuing to charge plan participants administrative expenses. In such lawsuits, the plaintiffs often argue that employers should instead use those forfeitures to cover administrative expenses, thereby directly reducing fees for participants. Greene notes that these claims are frequently framed as breaches of the fiduciary duties of loyalty and prudence, among other allegations. The core argument is that using forfeitures to benefit the employer rather than the participants constitutes a self-serving act, contrary to the fiduciaries’ obligation to act solely in the participants’ best interests.

Another emerging front concerns voluntary benefits plans. Greene points out that these plans often receive less attention from plan sponsors, primarily due to ERISA’s safe harbor provision for certain forms of voluntary benefits (29 CFR 2510.3-1(j)). This provision generally exempts employers from ERISA’s fiduciary requirements if specific conditions are met, such as the employer not endorsing the program, receiving no consideration, and limiting its involvement to merely permitting the insurer to publicize the program. However, litigation can still arise, alleging that the vendors administering these plans have unjustly enriched themselves—for example, by charging excessive commissions—thereby constituting a failure of the employer to carry out its residual fiduciary obligations, even if minimal, or to properly monitor the vendor’s conduct. The argument here is that even if the plan itself is exempt, the employer still has a duty to ensure that the offerings provided through their platform are not predatory or exploitative of their employees.

Beyond the Basics: Other Common Claims Targeting Fiduciaries

While forfeiture misuse and voluntary benefits present new challenges, other established areas of ERISA litigation continue to dominate. These include:

• Excessive Fees: This remains the most common type of ERISA class action. Plaintiffs allege that plan fiduciaries allowed recordkeeping, administrative, or investment management fees to be too high, failing to negotiate effectively or select lower-cost options. This often involves comparing a plan’s fees to industry benchmarks or those of similar plans.
• Imprudent Investment Choices: Lawsuits frequently challenge the selection and monitoring of plan investments. This can involve allegations that fiduciaries offered funds with poor performance, high fees, or inappropriate risk profiles, or failed to diversify investments adequately. The "prudent expert" standard demands ongoing review and adjustments to the investment lineup.
• Conflicts of Interest: Fiduciaries are strictly prohibited from engaging in transactions that create conflicts of interest or benefit themselves at the expense of the plan. Litigation can arise if a fiduciary benefits personally from plan transactions, or if service providers have undisclosed relationships that compromise their objectivity.
• Cybersecurity Breaches: An increasingly critical area, especially with the Department of Labor’s heightened focus. Lawsuits can stem from data breaches that expose participants’ personal or financial information, alleging a failure by fiduciaries to adequately protect plan assets and data through robust cybersecurity protocols.
• Revenue Sharing: Practices where service providers receive indirect compensation (e.g., from mutual funds) that is not fully disclosed or accounted for can lead to litigation, alleging a lack of transparency and potential breaches of loyalty.

The Imperative of Robust Vendor Oversight

Given the central role of third-party administrators and other service providers in benefits operations, diligent vendor oversight is not merely a best practice but a fundamental fiduciary obligation. Much of this work involves constant and clear communication between the employer and the vendor or service provider, Greene emphasizes. Employers should prioritize enlisting vendors with whom they are comfortable having open and ongoing discussions about critical areas such as investment decisions, fee structures, and service delivery.

Effective vendor oversight encompasses several key steps:

1. Thorough Due Diligence in Selection: Before engaging a vendor, employers must conduct comprehensive research, evaluate multiple providers, and document the selection process. This includes assessing their qualifications, experience, financial stability, and reputation.
2. Clear Service Level Agreements (SLAs): Contracts must clearly define the scope of services, performance expectations, reporting requirements, and fee structures. These agreements should be regularly reviewed and updated.
3. Ongoing Performance Monitoring: Fiduciaries must continuously monitor vendor performance against established SLAs and industry benchmarks. This includes reviewing service reports, participant feedback, and addressing any deficiencies promptly. Greene states, "It’s a fiduciary issue if they’re making regular errors. That’s when we start to look at replacing them." This underscores the necessity of a proactive approach to vendor management, rather than waiting for systemic failures.
4. Fee Benchmarking and Transparency: Regularly compare vendor fees to those charged by other providers for similar services. Ensure complete transparency regarding all direct and indirect compensation received by the vendor.
5. Understanding Sub-Contractor Relationships: Fiduciaries should also understand if their primary vendor utilizes sub-contractors and ensure appropriate oversight extends to these entities as well.

Fortifying Internal Processes and Governance: The Shield Against Litigation

Greene notes that process failures are a common precursor to ERISA litigation. Employers must therefore be wary of common missteps, such as adopting a "set-and-forget" approach to plan investments or neglecting to regularly review investment decisions. Fiduciary governance, she stresses, is an ongoing practice, and employers should view their plan documents as living documents that require continuous attention and adaptation.

A robust fiduciary governance framework should include:

• Formal Fiduciary Committee: Establishing a dedicated committee responsible for plan oversight, with a clearly defined charter outlining its responsibilities, authority, and operating procedures.
• Regular Committee Meetings: Conducting scheduled meetings with detailed agendas. Crucially, committees must properly document their operations through comprehensive meeting minutes. These minutes should record discussions, decisions made, the rationale behind those decisions, any dissenting opinions, and action items. This "operational history" demonstrates that the committee has followed its charter and acted prudently.
• Investment Policy Statement (IPS): Developing and regularly reviewing an IPS that outlines the plan’s investment objectives, risk tolerance, asset allocation strategies, and criteria for selecting and monitoring investment options. This document serves as a guide for all investment-related decisions and demonstrates a prudent process.
• Fiduciary Training: Providing ongoing education and training for all fiduciaries to ensure they understand their responsibilities, the nuances of ERISA, and current best practices.
• Aligning Operations with Plan Documents: Regarding the forfeiture-based litigation trend specifically, Greene advises employers to meticulously review their plan documents to confirm how the plan dictates forfeitures are to be used, as well as any ordering for such use. "Ensuring plan operations align with the plan document and documenting the fiduciary decision-making process around forfeitures can help put sponsors in a stronger position, considering this litigation trend," she continues. This alignment is paramount, as discrepancies between written policy and actual practice are fertile ground for lawsuits.

"Build a better process internally and document it," Greene advises. "It’s just a matter of following that process, understanding the allocation of fiduciary responsibilities, documenting what you can and remembering that this is an ongoing responsibility." This advice underscores the proactive, continuous nature of ERISA compliance.

Navigating the Regulatory Landscape: DOL and EBSA Scrutiny

The urgency of this guidance is further amplified by regulatory actions. In April, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued a field assistance bulletin, signaling its enforcement priorities. According to the bulletin, EBSA stated its intent to address the "most significant" harm to plan participants, specifically identifying improper administration of plan benefits and assets as a key focus area.

This EBSA bulletin serves as a clear indicator that employers must be exceptionally diligent and prudent when acting as plan sponsors. Greene suggests that employers can also leverage the agency’s enforcement releases as valuable intelligence, identifying areas they should scrutinize within their own plans to ensure vendor compliance and overall operational integrity. The DOL’s broader enforcement agenda also includes a focus on cybersecurity practices for plan service providers, the appropriate consideration of Environmental, Social, and Governance (ESG) factors in investment decisions, and the valuation of private equity and other illiquid assets within retirement plans. These priorities reflect the evolving risks and complexities in the benefits landscape, demanding continuous attention from fiduciaries.

Strategic Imperatives for Employers: Proactive Risk Mitigation

The implications of failing to meet ERISA’s stringent fiduciary standards are substantial, ranging from significant financial penalties and costly legal fees to severe reputational damage. Plan fiduciaries can be held personally liable for breaches of duty, making proactive risk mitigation an absolute necessity.

To safeguard against the mounting tide of litigation, employers should consider implementing several strategic imperatives:

1. Conducting Regular Fiduciary Audits: Periodically engaging independent experts to review plan operations, investment performance, fee structures, and compliance with ERISA requirements. These audits can identify potential vulnerabilities before they escalate into legal challenges.
2. Retaining Independent Experts: Working with independent investment advisors, legal counsel specializing in ERISA, and third-party consultants can provide invaluable expertise and demonstrate a commitment to prudence. These experts can assist with vendor selection, fee benchmarking, and investment monitoring.
3. Comprehensive Review of Plan Documents: Beyond forfeitures, a thorough review of all plan documents—including the plan instrument, trust agreement, and summary plan description—is crucial to ensure they accurately reflect current operations and comply with regulatory requirements.
4. Implementing a Robust Vendor Management Program: Moving beyond basic oversight to a structured, ongoing program that includes regular performance reviews, contractual renegotiations, and a clear process for addressing and documenting vendor issues.
5. Fostering a Culture of Compliance: Ensuring that all individuals involved in plan administration understand their roles, responsibilities, and the importance of adhering to ERISA’s fiduciary standards.

Conclusion: The Unyielding Mandate for Prudence and Process

In summary, the current legal and regulatory environment leaves no room for complacency regarding employee benefits plans. The dramatic increase in ERISA class-action lawsuits, coupled with the Department of Labor’s heightened enforcement focus, places unprecedented pressure on employers acting as plan fiduciaries. As Anne Greene succinctly puts it, "ERISA is not as much about the outcome as it is a process. We want to be thoughtful about how we document that. We have to be able to demonstrate that reasonable and prudent process."

This philosophy underscores the paramount importance of meticulous documentation, continuous oversight, and a commitment to transparent and diligent processes. Employers who proactively build and maintain robust fiduciary governance structures, rigorously manage their vendors, and meticulously document every decision and action related to their benefits plans will be best positioned to navigate this challenging landscape, safeguard their organizations, and, most importantly, fulfill their fundamental duty to protect the financial well-being of their employees. The time for action is now, as the cost of inaction continues to rise dramatically.