An explosion of lawsuits against health and retirement plans is imposing crushing and unnecessary costs on the benefit plans that employers provide to millions of Americans. ERIC is a leader in the effort to reverse this expensive trend.
Last week, Mr. Glenn Butash, Chair of the Legal Center for The ERISA Industry Committee (ERIC), provided testimony explaining the consequences of these suits to a House of Representatives subcommittee.
On December 2nd, the House Education and Workforce Committee’s Subcommittee on Health, Employment, Labor, and Pensions held a hearing titled “Pension Predators: Stopping Class Action Abuse Against Workers’ Retirement.” At the hearing, Mr. Butash detailed the dramatic escalation in cases brought by class action plaintiffs’ firms over the last 15 years.
ERIC and our member companies do not object to plan participants pursuing well-founded claims permitted under the federal law governing benefits, the Employee Retirement Income Security Act (ERISA). However, much of the recent litigation appears designed to force quick settlements with only minimal recoveries for participants, while imposing heavy legal, insurance, and operational costs on employers.
Mr. Butash explained that commonsense, targeted reforms are needed to curb abusive litigation against employers, such as:
1. Congress should address the Supreme Court’s decision in Cunningham v. Cornell by requiring a plaintiff suing a benefit plan and alleging a violation of ERISA’s “prohibited transaction” rules regarding contracts with plan service providers to also allege that the “reasonable compensation” exception does not apply. This would allow more cases to be resolved earlier in litigation.
2. Congress should require, in cases attacking the fees a plan pays or the performance of plan investments, that the plaintiff plead a meaningful, context-specific, benchmark comparator supporting the allegation that the fiduciary’s process was flawed.
3. Discovery in litigation should be stayed while a motion to dismiss is pending. Because discovery is so expensive, it should be put “on hold” while a court decides the legal issue on which the case will turn. That way, benefit plans don’t needlessly incur hundreds of thousands of dollars in added costs.
ERIC thanks Mr. Butash for testifying on behalf of ERIC and its members. As ERIC continues to pursue litigation reform, please stay engaged. Whether that is by following our policy alerts, participating in member briefings, or engaging with lawmakers, Congress needs your insights and expertise. Your voice ensures that policymakers understand the stakes and appreciate why these reforms are so important to protecting benefits for millions of workers and retirees.
Read Glenn’s testimony here.