Category: ERISA Litigation

The Plaintiffs’ Bar Has AI, Too

If your company sponsors a 401(k) plan, a pension, or a self-insured health plan, you are a potential defendant — and whether you become an actual one has less to do with whether you did anything wrong than with whether your plan is large enough to attract attention. Whether you win or settle an ERISA fiduciary lawsuit depends on whether your conduct as a fiduciary is documented in such a way as to defeat the Plaintiff bar’s template complaint. This has been fundamentally true for retirement plans for two decades. Two developments make it more urgent today: First, in April 2025 the Supreme Court made these cases significantly easier to file and harder to dismiss. And second, the targeting engine that the Plaintiff lawyers use to choose defendants now runs on the same public data and inexpensive AI that everyone else has access to.

The good news is that the best defense is the same as it has always been, only more so: a prudent, documented fiduciary process. The faster and cheaper it becomes to find you, the more your fiduciary file — not your luck — is what protects you.

Four things every Plan fiduciary should do, explained below:

1. Stop assuming you are too small or too clean to be sued. Target selection tracks plan size, but AI-assisted template-ability is lowering the bar. Fiduciary misconduct (or lack thereof) is not what determines whether you will be sued.
2. Build (or enhance) your prudent documentation process now — because after *Cunningham*, the fight moves to discovery, where documentation wins or loses it.
3. Audit the specific items plaintiffs are litigating today — fees, forfeitures, PBM oversight, and tobacco surcharges.
4. Govern your own benefits team’s AI use so it reduces your exposure instead of quietly creating it.

The ERISA litigation machine is already running

ERISA fee litigation is not a series of one-off disputes; it is a repeatable business model. A relatively small number of plaintiffs’ firms file large volumes of near-identical complaints, and they pick targets from public information — principally the Form 5500 that every plan files and that anyone can read, plus SEC filings and plan documents.

The selection criteria they use are revealing. Industry trackers of this litigation observe that suits overwhelmingly target large plans — and, counterintuitively, often target large plans whose fees are already low. That is not a paradox if you consider the economics: the settlement leverage comes from plan size and the cost of defense, not from the size of any actual overcharge. A Plaintiff firm scanning for its next case is looking for a plan big enough to justify the effort and a fact pattern that fits a complaint it has already written fifteen times. While size still matters when it comes to the risk of being sued, AI efficiency gains are lowering the bar.

The question is not “did this fiduciary breach a duty?” It is “can we plausibly (and efficiently) allege one against a plan this size?” Increasingly, your ability to defend yourself, not your size or your innocence, is what keeps you off the list.

The bar recently dropped: Cunningham v. Cornell

On April 17, 2025, the US Supreme Court unanimously decided Cunningham v. Cornell University, 604 U.S. ___ (2025), and changed the math on a whole category of these cases. The question was technical but the consequence is not. To state a prohibited-transaction claim under ERISA § 406(a) — for example, that the plan paid a recordkeeper, who is a “party in interest” — must the plaintiff also plead that none of § 408’s exemptions (including the everyday exemption for reasonable compensation for necessary services) applies?

The Court said no. The § 408 exemptions are affirmative defenses the fiduciary must raise and prove; the plaintiff need only allege the bare elements of § 406, which is ridiculously easy to do. In practice, that means a plaintiff can survive a motion to dismiss by alleging something nearly every plan does — paying its service providers — and proceed into discovery. The Court openly acknowledged the risk that this opens the door to more litigation and pointed lower courts to tools to weed out meritless claims (Rule 7(a) replies, Article III standing, limited discovery, Rule 11 sanctions, and cost-shifting). The concurrence was blunter, warning of “untoward practical results.”

Why it matters to you: in ERISA fiduciary litigation, even before Cunningham, the motion-to-dismiss stage had become “the whole ball game.” Once a case clears that hurdle, the cost and disruption of discovery push even strong defendants toward settlement. Cunningham lowered that bar. This increases the stakes – your process now carries more of the weight — and that is built long before any complaint is filed.

The frontier is widening

The Plaintiff’s legal theories are multiplying, and they are reaching plan types that used to feel safe.

– Forfeitures. Beginning with a September 2023 suit against Thermo Fisher, roughly fifteen near-identical class actions have challenged a practice the IRS has expressly permitted for decades — using 401(k) forfeitures to offset employer contributions rather than to reduce participant expenses. Defendants named include Intuit, Clorox, Qualcomm, HP, and BAE Systems. Results are split: some courts have dismissed (the plan language made the choice a settlor decision), others have let the claims proceed.
– Health plans and Pharmacy Benefits Managers (PBMs). A newer wave of cases allege that fiduciaries imprudently managed pharmacy benefit manager arrangements and overpaid for drugs. So far courts have largely dismissed these on Article III standing grounds, but plaintiffs keep refining their approach to find a way in, and incoming PBM price-transparency data will hand them more raw material to work with.
– Tobacco surcharges and wellness incentives. A separate line of cases challenges premium surcharges on tobacco users and wellness-program designs under ERISA and HIPAA nondiscrimination rules.

The common thread here is that same fiduciary-breach playbook built over twenty years in the $10-trillion-plus retirement market is being aimed at the $5-trillion-plus health market — which means welfare-plan fiduciaries who never thought of themselves as litigation targets now are.

Where AI comes in — for them, and for you

Here is our theory: the targeting that drives this litigation is already data-driven, and inexpensive AI lowers its cost further. Reading thousands of Form 5500 filings, flagging plans by size and fee pattern, and pulling matching language from plan documents is exactly the kind of work Ai can now do quickly and cheaply.

The practical implication is a lower economic floor for a viable case. Litigation that once made sense only against mega-plans has already crept toward plans in the $250-million-to-$750-million range; cheaper scanning pushes that floor down further. “We’re not big enough to bother with” is a weaker bet every year.

But the same capability cuts both ways, and that is the opportunity for plan fiduciaries. The AI tools a plaintiff’s firm uses to find a problem in your plan, are the same tools that you can use — to benchmark your fees, surface gaps in your governance file, and document the prudent process that defeats these claims at the only stage that matters. Finding and fixing your own issues before someone else finds them is now a realistic exercise.

One elated caution worth mentioning: if your benefits team is already using general-purpose AI — to interpret plan provisions, answer eligibility or COBRA questions, or triage testing issues — without verification, documentation, or a rule about when to escalate to counsel, that is not a productivity use of AI. It is an undocumented, unsupervised decision process sitting inside a regulated fiduciary function, and it is precisely the kind of thing that looks bad in discovery. AI in the benefits department is either part of your governance or part of your exposure. There is no neutral third option.

What to do now

1. Treat target-ability as the real risk, and assume you have it. If your plan is not large and your conduct is documentable, you are in range regardless of whether you have done anything wrong. Stop relying on size or a clean conscience as a defense.
2. Ensure your process is prudent and write it down. A functioning fiduciary committee, regular meetings with real minutes, periodic benchmarking and RFPs for major service providers, and a documented basis for each significant decision. After Cunningham, the contest moves into discovery — and a contemporaneous record of prudent process is more important than ever.
3. Audit the specific items plaintiffs are litigating right now. Benchmark recordkeeping and investment fees; review your forfeiture-allocation language and practice against your plan document; examine your PBM contract and the oversight you actually exercise over it; and confirm any tobacco surcharge or wellness incentive offers a compliant reasonable-alternative standard.
4. Govern your team’s AI use deliberately. Adopt an AI-use policy for the benefits function, require human verification of AI output, set clear criteria for when a question goes to counsel, and document vendor due diligence for any AI tool touching plan administration — so that a fiduciary committee can show it adopted AI prudently rather than drifted into it.
5. Consider using AI to find your own gaps first. The defensible move is to run the same kind of review against yourself that a plaintiff’s firm would, and to fix and document what you find — before the file is built by someone whose interests are adverse to yours.

The volume, the data-driven targeting, and the lowered pleading bar are real. The fear some of this generates is not the right response, and frankly not warranted — many of the newer theories are being dismissed, and there are signs of a regulatory appetite to curb litigation abuse. The right response is the unglamorous one: know where you are exposed, run a prudent process, and keep a record good enough to end a meritless case early. If you would like an assessment of where your practices fit, give us a call.

Supreme Court Raises Bar for Dismissing ERISA Prohibited Transaction Claims

The Supreme Court made it easier for plaintiffs to bring ERISA prohibited transaction claims last month when it unanimously adopted a lower pleading threshold for plaintiffs making such claims. Effectively, the Court’s decision in Cunningham v. Cornell University allows participant plaintiffs to more easily withstand a plan sponsor’s motion to dismiss, potentially opening the door to increased litigation targeting ERISA plans for common transactions with service providers. This is expected to result in more costly and time-consuming litigation, even in cases that do not ultimately have merit.

Key Holdings

The Court’s central holding establishes that plaintiffs alleging prohibited transactions under ERISA are not required to address statutory exemptions to such transactions in their complaints. Instead, the responsibility to invoke and ultimately prove these exemptions now rests squarely with plan sponsors and fiduciaries as affirmative defenses.

For example, under ERISA a plan sponsor who engages and pays service providers (such as recordkeepers and investment managers) engages in a prohibited transaction. Congress understandably also created an exemption to the prohibited transaction rules for payment of reasonable compensation to necessary service providers. The Court held that the structure of the statute, which places the prohibitions in one section and the exemptions in another, suggests that Congress intended for the exemptions to function as limitations on the prohibitions, rather than as integral elements of the prohibited transactions themselves. Thus, plaintiffs do not have an obligation to address the exemptions—rather, it is the defendant’s obligation to raise and demonstrate that an exemption applies.

Implications for Future Prohibited Transaction Litigation

This ruling may lead to an increase in ERISA litigation, as more claims survive initial dismissal motions, resulting in costly discovery and ongoing litigation, even in cases that appear to fall squarely under the ERISA prohibited transaction exemptions. As a result, more defendants may consider settling even meritless claims. The Court recognized these concerns but ultimately concluded that they could not override the clear statutory text and the established framework of ERISA. The Court suggested that trial courts utilize several existing procedural tools to mitigate the risk of meritless claims, but it remains to be seen how trial courts will approach the issue.

Practical Considerations for Plan Sponsors

Given the heightened litigation risk, there are several actions plan sponsors should take to anticipate potential challenges and ensure robust fiduciary practices are in place to withstand scrutiny.

1. Review Service Provider Agreements: Ensure that compensation paid to plan service providers from plan assets is reasonable. It is also advisable to maintain documentation demonstrating the necessity of the services provided and the reasonableness of the compensation paid for those services.

2. Document Fiduciary Processes: Maintain thorough records of decision-making processes related to plan management to provide evidence of prudent fiduciary conduct, particularly with respect to the selection, retention, and ongoing monitoring of service providers.

3. Stay Informed on Legal Developments: Keep abreast of evolving ERISA litigation trends and consider consulting legal counsel to assess and mitigate potential risks.

This decision underscores the importance of proactive fiduciary oversight and may signal increased judicial scrutiny of retirement plan management practices. If you would like to improve your fiduciary governance or assess how to better protect yourself from ERISA litigation, please do not hesitate to reach out to one of our experienced attorneys.

9th Circuit Clarifies Service Provider’s Fiduciary Duties When Negotiating Fees and When Withdrawing Fees from Plan Assets

The Ninth Circuit Court of Appeals has issued an opinion in Santomenno v. Transamerica LLC, clarifying the circumstances under which a retirement plan investment service provider breaches (and does not breach) its fiduciary duties when negotiating its fees and when collecting the agreed fees from plan accounts.

The Case

The trial court in this case held that the plan investment service provider breached its fiduciary duties to plan beneficiaries first when negotiating with the employer about providing services to the plan and later when withdrawing predetermined fees from plan funds.

The 9th Circuit held that a plan administrator is not an ERISA fiduciary when negotiating its compensation with a prospective customer. The employer/plan sponsor doing the hiring is acting under a fiduciary duty when it negotiates these fees. Therefore, the prospective service provider did not breach its duties in negotiating for the fees it wanted to receive.

The Court also held that the service provider was not a fiduciary with respect to its receipt of revenue sharing payments from investment managers after it became a service provider to the Plan because the payments were fully disclosed before the provider agreements were signed and did not come from plan assets.

Finally, and most significantly, the Court held that the service provider also did not breach its fiduciary duty with respect to its withdrawal of the preset fees from plan funds. The Court concluded that when a service provider’s definitively calculable and nondiscretionary compensation is clearly set forth in a contract with the fiduciary-employer, collection of those fees out of plan funds in strict adherence to that contractual term is not a breach of the provider’s fiduciary duty. The withdrawal of its fees in such circumstances is a ministerial act that does not give rise to fiduciary liability.

The Take-Aways

This case highlights the importance of the fiduciary role played by the plan sponsor and administrator when hiring service providers to the Plan. Hiring and retention decisions are fiduciary acts on the part of the employer/plan sponsor, but are not fiduciary acts on the part of the service provider being hired.

In addition, while this case illustrates that it is not always a fiduciary act for a service provider to withdraw its fees directly from plan assets, that is not true in every case. For example, if the Plan sponsor or administrator disputed a charge before the service provider withdrew its fees, or if the fees withdrawn by the service provider were based on hours worked or some other non-ministerial measure of the service provided, the withdrawal may not be ministerial. This case therefore does not give service providers free reign to withdraw fees from plan assets without consideration of their fiduciary duties.

Santomenno v. Transamerica LLC

Supreme Court Rejects “Yard-Man” Inference of Vesting of Retiree Health Benefits

The United States Supreme Court has ruled in the case of CNH Indus. N.V. v. Reese, that courts cannot simply infer lifetime vesting of retiree health benefits from a collective bargaining agreement. Instead, lifetime vesting must be expressly written into the agreement.

The Case

The employer in this case provided health benefits to certain employees who were eligible for benefits under the employer’s pension plan, in accordance with a collective bargaining agreement (CBA). When the CBA expired in 2004, some retirees sued, arguing that their health benefits were vested for life.

While the lawsuit was pending, the Supreme Court decided M&G Polymers USA, LLC v. Tackett, which held that courts must interpret CBAs according to “ordinary principles of contract law.” The trial court in this case then ruled for the retirees, and the Sixth Circuit affirmed, relying on presumptions the 6th Circuit originally established in UAW v. Yard-Man, Inc., even though the Supreme Court had explicitly rejected those presumptions in Tackett. The Sixth Circuit’s decision turned on its holding that the CBA’s 2004 expiration date was inconclusive as to whether the retiree health benefits terminated in 2004 or were vested for life because (1) the CBA specified that certain benefits, such as life insurance, ceased at a time different from other provisions, and (2) the CBA tied health care benefits to pension eligibility. The court acknowledged that Tackett precluded it from inferring vesting based on these plan provisions, but concluded that the provisions nevertheless rendered the CBA ambiguous, allowing consideration of extrinsic evidence that supported lifetime vesting.

The Supreme Court reversed, stating that “inferences applied in Yard-Man and its progeny” do not represent ordinary principles of contract law and therefore cannot be used to generate a reasonable inference that then creates ambiguity. The Court acknowledged that, when a contract is ambiguous, courts can consult extrinsic evidence to determine the parties’ intentions—but a contract is not ambiguous unless it is susceptible to at least two reasonable but conflicting meanings. In this case, the Supreme Court held that the CBA contained a durational clause that applied to all benefits, with no exception for retiree health benefits, and that therefore there is only one reasonable interpretation of the CBA – that it does not vest retiree health benefits for life.

Take-Aways

This case is re-assuring for employers offering retiree medical plans – that they are less at risk of inadvertently creating a vested lifetime retiree health benefit than if the Plantiffs had prevailed in this case. However, the long standing advice still stands: Employers should be explicit in their retiree health plan documents and SPDs that the benefit is not vested and that the employer retains full and unfettered discretion to amend or terminate the plan and the benefits at any time.

Supreme Court Rules ERISA-Exempt “Church Plan” Includes Plan Maintained by Church-Affilaited Organizations (like hospitals and schools)

The United States Supreme Court has held, in Advocate Health Care Network v Stapleton that a benefit plan maintained by a church-affiliated organization, whose principal purpose is to fund or administer a benefits plan for the employees of either a church or a church-affiliated nonprofit (a “principal purpose organization”) is a church plan under ERISA Section 3(33), regardless of who established the Plan. This is in accordance with the long-standing regulatory position adopted by the IRS, Department of Labor and PBGC.

Background on ERISA’s Church Plan Exception

ERISA generally obligates private employers offering pension plans to adhere to an array of rules designed to ensure plan solvency and protect plan participants. “Church plans” however, are exempt from those regulations.

From the beginning, ERISA defined a “church plan” as “a plan established and maintained . . . for its employees . . . by a church.” Congress then amended the statute to expand that definition in two ways:

  • “A plan established and maintained for its employees . . . by a church . . . includes a plan maintained by an organization . . . the principal purpose . . . of which is the administration or funding of [such] plan . . . for the employees of a church . . . , if such organization is controlled by or associated with a church.” (The opinion refers to these organizations as “principal-purpose organizations.”)
  • An “employee of a church” includes an employee of a church-affiliated organization.

The Case

The Petitioners in Advocate Health Care Network v Stapleton were three church-affiliated nonprofits that run hospitals and other healthcare facilities, and offer their employees defined-benefit pension plans. Those plans were established by the hospitals themselves, and are managed by internal employee-benefits committees. Respondents, current and former hospital employees, filed class actions alleging that the hospitals’ pension plans do not fall within ERISA’s church plan exemption because they were not established by a church. The Supreme Court held for the hospitals, ruling that a plan maintained by a principal-purpose organization qualifies as a “church plan,” regardless of who established it.

The Court reasoned that the term “church plan” initially “mean[t]” only “a plan established and maintained . . . by a church.” But the amendment provides that the original definitional phrase will now “include” another—“a plan maintained by [a principal-purpose] organization.” That use of the word “include” is not literal, but tells readers that a different type of plan should receive the same treatment (i.e., an exemption) as the type described in the old definition. In other words, because Congress deemed the category of plans “established and maintained by a church” to “include” plans “maintained by” principal purpose organizations, those plans—and all those plans—are exempt from ERISA’s requirements.

What Comes Next?

Advocate Health Care Network v Stapleton does not rule on what is or is not a “principle purpose organization”, and that is where we can expect future litigation to focus. The key question will be whether such organization is “controlled by or associated with a church.” Therefore, church-affiliated organizations, such as hospitals, schools, and social welfare agencies, that are relying on ERISA’s church plan exception ought to review their documentation and evidence of either control by or affiliation with a church.

Be Careful Before Denying COBRA to Employee Terminated for Gross Misconduct

The Ninth Circuit Court of Appeals has rendered a decision in Mayes v. WinCo Holdings that reminds employers to be very cautious about denying COBRA coverage based on the gross misconduct exception.

Facts
Defendant grocery store fired the plaintiff, who supervised employees on the night-shift freight crew, for taking a stale cake from the store bakery to share with fellow employees and telling a loss prevention investigator that management had given her permission to do so. The employer deemed these actions theft and dishonesty, and determined that the plaintiff’s behavior rose to the level of gross misconduct under the store’s personnel policies. Therefore, the employer fired the employee and did not offer COBRA coverage to her or her dependents. Plaintiff sued asserting gender discrimination claims under Title VII, a claim under COBRA, and wage claims.

The Law
Under COBRA, an employer does not have to offer COBRA coverage to an employee and their covered dependents if the employee is terminated for “gross misconduct.” Unfortunately, the COBRA statute does not define “gross misconduct,” and court decisions do not provide clear guidance on what that term means.

The Case
The trial court in this case initially ruled in favor of the employer, finding that theft and dishonesty can constitute gross misconduct under COBRA, regardless of the amount involved. The Ninth Circuit reversed, finding that there was sufficient evidence of the employer’s discrimination to allow the discrimination case to go to trial, and reasoning that if the employer fired the plaintiff for discriminatory reasons then that could not constitute termination for gross misconduct. Therefore, if the termination was discriminatory the employee and her dependents would be entitled to COBRA benefits and the employee could prevail on her COBRA claims.

Lessons for Employers
An employer terminating someone for violating company policy (such as theft), may be reluctant to offer them COBRA coverage, particularly where the employer’s plan is self-insured and, therefore, the employer sees the potential for large medical claims. However, denying COBRA coverage based on the gross misconduct exception is risky for a number of reasons.

First, if the employer is ultimately found to have denied COBRA incorrectly it is exposed to penalties for failing to offer coverage, and the employee and their dependents can get COBRA coverage retroactive all the way back to the initial termination of coverage. That scenario could happen in the Mayes case.

Second, if a terminated employee foresees having large medical claims, they will have a bigger incentive to sue to secure coverage. If they do file suit for COBRA coverage, they will invariably include other claims attacking the termination decision. Therefore, denying COBRA coverage increases the likelihood of a costly lawsuit challenging the termination decision.

Third, defending a case that includes a COBRA claim is also more difficult than a straight wrongful termination claim. It is easier for a judge to grant an employer summary judgment on a wrongful termination claim, which only affects the employee plaintiff, than it is to uphold a denial of COBRA, which directly affects the employee and her children, who are innocent bystanders. In most cases, therefore, an employer is better off defending a wrongful termination suit alone, and not also defending a claim that the employer failed to offer COBRA coverage.

For these reasons, in most cases discretion is the better part of valor and employers should not invoke the gross misconduct exception.

Some employers may be concerned that offering COBRA coverage after terminating someone for gross misconduct may undermine their defense of the termination decision (on the theory that offering COBRA means the termination must not have been for gross misconduct). This can be mitigated by including a self-serving cover letter on the COBRA offer indicating that while the reasons for termination most likely amount to gross misconduct, the employer is voluntarily choosing to offer the employee and their dependents COBRA coverage.

A Retirement Plan Established by a Church-Affiliated Organization is not an ERISA-Exempt Church Plan (at least in the 9th, 3rd and 7th Circuits)

The 9th Circuit Court of Appeals recently held that, to qualify for the church plan exception to the requirements of the Employee Retirement Income Security Act (ERISA), a church plan (i) must be established by a church or by a convention or association of churches and (ii) must be maintained either by a church or by a church-controlled or church-affiliated organization whose principal purpose or function is to provide benefits to church employees.

The specific holding in in Rollins v. Dignity Health, 2016 WL 3997259 (9th Cir. 2016) was that Dignity Health’s pension plan was subject to the requirements of ERISA and did not qualify for ERISA’s church-plan exemption because it was not originally established by a church, even if it was maintained by a “principal purpose” organization. The 3rd and 7th circuits have reached the same conclusion when confronted with this question. See Kaplan v. Saint Peter’s Healthcare Sys., 810 F.3d 175, 180–81 (3d Cir. 2015); Stapleton v. Advocate Health Care Network, 817 F.3d 517, 523–27 (7th Cir. 2016).

Background

  • 29 U.S.C. § 1003(b)(2) provides that a church plan is exempt from ERISA.
  • 29 U.S.C. § 1002(33)(A) provides that in order to qualify for the church-plan exemption, a plan must be both established and maintained by a church.
  • 29 U.S.C. § 1002(33)(C)(i) provides that a plan established and maintained by a church “includes” a plan maintained by a principal-purpose organization.

The 9th Circuit reasoned that “there are two possible readings of subparagraph (C)(i). First, the subparagraph can be read to mean that a plan need only be maintained by a principal-purpose organization to qualify for the church-plan exemption. Under this reading, a plan maintained by a principal-purpose organization qualifies for the church-plan exemption even if it was established by an organization other than a church. Second, the subparagraph can be read to mean merely that maintenance by a principal purpose organization is the equivalent, for purposes of the exemption, of maintenance by a church. Under this reading, the exemption continues to require that the plan be established by a church.”

The 9th Circuit then held that “the more natural reading of subparagraph (C)(i) is that the phrase preceded by the word “includes” serves only to broaden the definition of organizations that may maintain a church plan. The phrase does not eliminate the requirement that a church plan must be established by a church.”

More

Rollins v. Dignity Health, 2016 WL 3997259 (9th Cir. 2016)

Kaplan v. Saint Peter’s Healthcare Sys., 810 F.3d 175, 180–81 (3d Cir. 2015)

Stapleton v. Advocate Health Care Network, 817 F.3d 517, 523–27 (7th Cir. 2016)

Plan Administrator Bears Burden to Produce Key Information Regarding Claimant’s Service and Benefits Eligibility

The 9th Circuit Court of Appeals ruled on April 21, 2016 that where a claimant has made a prima facie case that he is entitled to a pension benefit, but lacks access to the key information about corporate structure, or hours worked, needed to substantiate his claim, and the defendant controls this information, the burden shifts to the defendant to produce this information. Estate of Bruce H. Barton v. ADT Security Services Pension Plan (9th Cir., 2016).

The Plan Administrator could not place the burden of producing records establishing which entities participated in the pension plan between 1967 and 1986, and the claimant’s service record, on the claimant where the Plan Administrator had no records of its own.

The Plan Administrator originally denied the claim on the basis of an absence of records establishing eligibility for plan participation, actual participation, or accrual of plan benefits. This was wrong where the Committee rather than the claimant would likely be in possession of such records.

The lesson for Plan Administrators: keep plan documents,service records and contemporary records establishing benefit accruals forever -there is no practical document retention period for these documents.

The lesson for claimants: don’t be deterred from asserting a claim if you have enough evidence to state a prima facie case and the definitive documents or information ought to be in the Plan Administrator’s possession.

Estate of Bruce H. Barton v. ADT Security Services Pension Plan (9th Cir., 2016)

Fiduciaries Ultimately Prevail in Tibble v. Edison

On remand from the United States Supreme Court, which held in May 2015 that ERISA imposes on retirement plan fiduciaries an ongoing duty to monitor investments, even absent a change in circumstances, the 9th Circuit Court of Appeals recently affirmed the district court’s original judgment in favor of the employer and its benefits plan administrator on claims of breach of fiduciary duty in the selection and retention of certain mutual funds for a benefit plan governed by ERISA.

The court of appeals had previously affirmed the district court’s holding that the plan beneficiaries’ claims regarding the selection of mutual funds in 1999 were time-barred. The Supreme Court vacated the court of appeals’ decision, observing that federal law imposes on fiduciaries an ongoing duty to monitor investments even absent a change in circumstances.

On remand, the panel held that the beneficiaries forfeited such ongoing-duty-to-monitor argument by failing to raise it either before the district court or in their initial appeal. While the fiduciaries ultimately prevailed in this case, the lesson for fiduciaries remains clear: You have an ongoing duty to monitor the investment options in your retirement plans.

Tibble v. Edison International (9th Cir., 2016)

Full Text of the Supreme Court Decision in Tibble v. Edison International (2015)

7th Circuit Holds Only a Church Can Establish an ERISA-Exempt Church Plan

On March 17, 2016 the 7th Circuit Court of Appeals joined the 3rd Circuit in holding that a network of hospitals and health care locations that is affiliated with a church cannot establish an ERISA-exempt church plan. Stapleton v. Advocate Health Care Network (7th Cir. 2016).

In Stapleton, several current and former employees of the church-affiliated hospital claimed that the organization failed to comply with ERISA’s vesting, reporting and disclosure, funding, trust, and fiduciary rules. The 7th Circuit Curt of Appeals agreed.

This issue is bubbling up all over the country. District Court cases have decided the question both ways. There is a case pending before the Ninth Circuit that held at the District Curt level that an affiliate cannot establish a church plan. Rollins v. Dignity Health, 19 F. Supp. 3d 909, 917 (N.D. Cal. 2013), appeal filed, No. 15-15351 (9th Cir. Feb. 26, 2016). The employer in Rollins faces up to $1.2 billion in funding obligations if it loses the case.

District court cases in several other states have help the other way – that affiliated organizations can establish a church plan. The only two Court of Appeals cases to decide the question have ruled that the affiliated organization cannot establish a church plan. See Stapleton and Kaplan v. St. Peter’s Healthcare Sys., 810 F.3d 175 (3d Cir. 2015).

If you an organization affiliated with a church that is relying on the church plan exemption from ERISA’s vesting, reporting, disclosure, funding, trust, and fiduciary rules, you ought to review that decision with ERISA counsel.