While the state of the fiduciary insurance market in 2024 was largely status quo, that could change in the later part of 2025 as plaintiff lawyers have been busy all year inventing and pursuing new theories of liability. To some extent, plaintiffs (and the insurers) may be waiting for decisions in a few specific cases before deciding how to allocate their resources in 2025. While premium fluctuations were minor in 2024, with some insurers continuing to be wary while others sought market share and with flat renewals being the most common result, one or two particularly good or bad decisions could potentially move the needle. In particular, the following legal results could provide support for shifting the market back into a somewhat harder cycle:
However, the somewhat more likely opposite results seem unlikely to provide much premium relief, as they may be seen as merely maintaining the status quo.
Excessive fee class actions: There were 65 excessive fee class actions filed in 2024, with 39 of those cases being filed in the second half of the year (in comparison to 48 such cases being filed in all of 2023). Still the volume was down from 2022, which saw 89 filings.
In the initial aftermath of the U.S. Supreme Court’s pro-plaintiff Northwestern University decision in January 2022, few excessive fee cases were dismissed, but subsequent positive precedents from the Sixth, Seventh, Eighth and Tenth Circuits (CommonSpirit, Oshkosh, MidAmerican Energy Co. and Barrick Gold respectively) led to an increase in motions to dismiss being granted and upheld, particularly in those circuits.
Since then, appellate decisions have been a mixed bag. The main dividing line seems to be whether courts require plaintiffs to provide “meaningful benchmarks” in their complaints.
See further discussion of specific excessive fee decisions in the section on legal authority below.
Prediction: It seems unlikely that we will see a return to 2022 filing volume, but 2025 will likely see a number more like 68 than 48 (the filing volume in 2023).
Meanwhile, several other types of class actions were filed in 2024 and can be expected to continue into 2025.
Forfeiture litigation: Starting in September of 2023, one two-person California plaintiff firm filed four lawsuits against four different sponsors of defined contribution plans, alleging that it was impermissible self-dealing for companies to defray future plan contributions by using forfeited funds related to departing employees who didn’t vest in their employer match. Since then, other law firms joined in and more than 10 such lawsuits were filed on a standalone basis. Thereafter, certain high volume filers of excessive fee class actions started to include forfeiture allegations in their complaints, bringing the total number of forfeiture-related suits filed in 2024 to more than 30.
These allegations seem to contradict long-established practices, seemingly endorsed by both the Internal Revenue Service and the Department of Labor. Just this year, the IRS proposed regulations concerning the timing for reallocating forfeiture, without raising any concerns. In addition, defendants have raised arguments that the challenged decisions are funding decisions which should be considered “settlor acts” which are not subject to fiduciary duties. Nonetheless, although several of these suits have been dismissed (sometimes with leave to replead), at least two of the complaints have survived a motion to dismiss. One court, in dismissing the case, pointed out that (unlike in some other cases) the defendant’s plan document did not allow discretion for how forfeitures should be allocated.
Prediction: The weight of authority will eventually go against plaintiffs in relation to forfeiture allegations, but until it does there will continue to be new filings.
Tobacco/vaccination surcharge cases: In 2024, several different law firms filed at least 27 class actions alleging that plan sponsors violate the anti-discrimination provisions which were amended into ERISA by the Patient Protection and Affordable Care Act by charging a higher premium based on a “health status-related factor” without offering an acceptable wellness program to allow for a retroactive exception. While most of these cases involve a class of tobacco smokers, some cases involve higher premiums for unvaccinated participants. These cases are new and everyone is waiting for court decisions to validate or strike down the allegations. Since plaintiffs are largely relying on DOL regulations which require that the exception be provided on a retroactive basis (the “full reward” must be available), defendants’ chances in these suits may be bolstered by the recent decision in Loper Bright v. Raimondo, which struck down the Chevron standard of deference to regulatory agency interpretations of statute.
Prediction: These suits will continue and result in some substantial settlements, but some courts will rely on Loper Bright to ignore the DOL’s draconian interpretation of the ERISA anti-discrimination provisions in question and rule that retroactivity is not required.
Actuarial equivalence class actions: Class actions arising from allegedly outdated mortality tables, which first appeared on the scene in 2018, continue to be filed. These cases allege that, by basing their calculations on obsolete mortality tables from periods between 1950 and the 1980s, plan sponsors have been underpaying benefits to retirees who elect to receive lump sums. More than 30 such class actions have been filed, including three in 2024. The main issue is whether ERISA has an implied requirement that mortality tables be “reasonable” (because it does not have an express requirement to that effect).
Although more actuarial equivalence cases have gotten past motions to dismiss than have been dismissed, and some cases have been settled for substantial figures (including a $59 million settlement), to date there has never been a finding of liability. Note, also, that in two cases in which courts addressed the merits of class certification, the courts both refused to grant certification.
Prediction: The annual volume of filings will remain modest, with circuits remaining split as to whether a “reasonableness” standard should be an implied requirement.
Welfare excessive fee litigation: On February 5, 2024, a Johnson & Johnson employee filed a proposed class action alleging that J&J employees have been overcharged for prescription drug benefits. The lawsuit is structured similarly to defined contribution retirement plan excessive fee litigation, alleging that J&J’s failure to negotiate lower prices constitutes a breach of its fiduciary duties under ERISA.
The primary defenses are likely to be based on standing, arguments which have previously been successful in prior class actions relating to health plan costs.
On July 30, 2024, the same plaintiff firm filed an almost identical second suit against another large public company, also focusing on the price of prescriptions from Express Scripts.
The fact that there have been no additional such suits filed, not even by Schlichter Bogard firm which has announced that it is contemplating such suits, suggests that plaintiffs are waiting for the outcome of these test cases before filing more.
Prediction: At least one of these two cases will be dismissed due to lack of standing. If one of the cases survives initial motions, then more such suits will definitely be filed. If plaintiffs don’t file additional cases, the DOL might pursue some such claims (since the DOL has statutory standing).
Litigation arising from pension buyouts: In the midst of positive news about defined benefit pension plan funding and a rise in plan sponsors arranging with insurers for buyouts of their pension liabilities (in order to gain access to the surpluses), plaintiffs have filed class actions against at least ten plan sponsors (including as recently as December 12, 2024) who have arranged for such transactions. The defendants may have strong defenses to plaintiff’s efforts to achieve standing based on a stated concern that their benefits will not be paid in the future if and when the relevant insurer becomes insolvent. All of the suits involve the same insurer, who is described in one complaint as “a private-equity controlled insurance company with a highly risky offshore structure” and a limited track record. These suits come as the Department of Labor has issued a report about fiduciary standards that apply to selecting annuity providers for defined benefit pension plans, saying that it should “explore developments in both the life insurance industry and in pension risk transfer” and possibly suggest changes to the Interpretive Bulletin which has been in place since 1995.
Prediction: Plaintiffs will continue to sue plan sponsors which conducted PRTs involving the same allegedly risky insurer. Most of the cases will be dismissed due to lack of standing (none of the plaintiffs have suffered any loss of benefits yet), but one or more suit probably will be allowed to proceed by a court which is concerned about the bona fides of the insurer in question.
Environmental, social and governance (ESG) and anti-ESG risks: In general, in the United States, plan sponsors and other fiduciaries face more exposure from plaintiffs and regulators who oppose ESG principles than from those who favor them, especially as we expect to see an amendment to the DOL’s ESG investment rule which offered some protection for ESG-oriented investing.
The DOL ESG investment rule: The rule which was proposed by the DOL during the current administration, which achieved final rule status and is currently in effect despite substantial opposition, is now certain to be amended back to the prior administration’s 2020 version in order to discourage ESG-oriented investing.
On October 14, 2021, the DOL had published for comment a new rule to modify the previous administration’s 2020 rule that was perceived as discouraging retirement plans from investing in ESG-related investment options by putting a burden on fiduciaries to justify such investments. As the DOL explained in the Supplemental Information provided when they published the rule in the Federal Register,” the need for clarification comes from the chilling effect and other potential negative consequences caused by the current regulation with respect to consideration of climate change and other ESG factors in connection with these activities."
The current administration’s rule became effective on January 30, 2023, despite legislative and litigation efforts to block it.
On the litigation front, days before the rule was about to go into effect 25 state attorneys general and three private plaintiffs sued in federal court, in Amarillo, Texas, to block the rule as beyond the DOL’s authority. In March, the judge there rejected a motion to transfer venue, accusing the plaintiffs of forum shopping. However, in September, 2023 the judge dismissed the suit, giving deference to the DOL interpretation but also agreeing with the DOL that the rule was fundamentally neutral (a similar suit filed in Wisconsin in February, 2024 is still pending). On July 18, 2024, the 5th Circuit sent the case back to the district judge to exercise his “independent judgment,” citing the U.S. Supreme Court’s June 28 decision in Loper Bright Enterprises et al. v. Raimondo which voided the Chevron doctrine of deference to agency rulemaking.
Prediction: The new administration will certainly reinstate the 2020 ESG investing rule, which will moot most of the issues but possibly leave open the question of whether any DOL interpretation matters in light of Loper Bright.
American Airlines was sued in Texas federal court in June 2023 for allegedly offering imprudent and expensive ESG-oriented investments. American Airlines has stated that it did not actually include such investment options in its main menu, but the motion to dismiss was denied on February 21, 2024, with the judge finding to be sufficient the allegations that “Defendants’ public commitment to ESG initiatives motivated the disloyal decision to invest Plan assets with managers who pursue non-economic ESG objectives through select investments that underperform relative to non-ESG investments.” Thereafter, on June 20, the judge denied a motion for summary judgment, stating that “[t]he summary judgment record makes clear that a factfinder could find defendants breached their duty of prudence by failing to monitor investment managers and failing to address the facts and circumstances of ESG proxy voting and shareholder activism present within the Plan.” The bench trial began four days later, resulting in a decision on January 10, 2025, finding that American did not violate the duty of prudence but did breach the duty of loyalty due to a close relationship with BlackRock. The court asked for additional briefing on damages, having expressed some skepticism for plaintiff’s theories on that front.
Prediction: Although the court may find little or no damages, and the final decision seems likely to be reversed on appeal, it is probable that more plaintiffs will file anti-ESG oriented class actions (particularly in Texas and particularly against plan sponsors who utilize BlackRock as investment managers).
The Employee Benefit Security Administration (EBSA) and the DOL have stated their enforcement priorities in connection with their FY2025 Congressional Budget Justification.
EBSA and the DOL have asked for appropriations specifically earmarked for Mental Health Parity and Addiction Equity Act (MHPAEA) Audits and for No Surprises Act enforcement. The DOL has released information about their MHPAEA enforcement efforts over the last few years.
Also, EBSA stated that it plans to “continue to increase its focus on cybersecurity and develop improved investigative techniques to better address cybersecurity threats and breaches relation to employee benefit plans. EBSA will carry out fiduciary audit oversight efforts on conducting post implementation cybersecurity reviews of the new recordkeeping system that was implemented in June 2022 by the Thrift Savings Plan (TSP) and continue coordination with other government cybersecurity resources to prevent cybersecurity criminal activities.”
Prediction: The incoming administration is likely to shift priorities and possibly reduce funding and staffing.
IRS allows for increased plan design flexibility: Recently the IRS issued a private letter ruling which approved a defined contribution plan design which allowed participants flexibility to direct contributions into several different options: retirement savings, to fund a Health Savings Account (HSA), to be used for Student Loan Reimbursement (SLR) or for a retiree Health Reimbursement Arrangement (HRA). WTW, which served as a strategic advisor to the company that requested the groundbreaking IRS ruling and assisted with developing the plan design in line with regulatory requirements, is now making this solution more generally available.
Prediction: These types of flexible plans will become more common as participants ask for them.
Fiduciaries are presumably considering many factors in relation to themselves and to any parties to whom they delegate any duties, starting with whether they understand how AI is or isn’t being incorporated into decision making. What are the risks of using AI and of not using it? How can one ensure that information being used and created by AI is reliable and compliant with regulations? Do the benefits of AI-powered recordkeeping functions outweigh the potential risks? Should the fiduciaries seek independent professional advice regarding how they should be using AI? For a more detailed discussion of this topic, see this article.
Prediction: In 2025 we’re likely to see the first litigation filed which includes allegations concerning AI. Fiduciaries will want to know the answers to questions like the ones above in order to have a chance of establishing process-related defenses to such claims.
As mentioned above, appellate decision relating to excessive fee class actions have been a mixed bag, largely depending on whether the court in question insists that plaintiffs must plead a “meaningful benchmark” comparison in order to survive a motion to dismiss.
Share class allegations remain the most difficult to get dismissed on initial motion. The Fifth and Sixth Circuits reversed dismissals in cases involving expensive retail share classes, while a district court in the Central District of California found for the defendants on the issue after a prudent process was demonstrated at trial. Meanwhile, the Second Circuit reversed a defense verdict on this issue which was reached after a full trial. In another case which didn’t involve share class allegations, the Second Circuit upheld a grant of summary judgment based on a finding of a robust process.
The Second Circuit and the Eighth Circuit affirmed dismissals because the complaints did not allege “meaningful benchmarks,” while the Third Circuit found that meaningful benchmarks had been alleged but partly because it accepted plaintiffs’ allegations concerning the commodification of plan services. Meanwhile, in a highly criticized decision with a strong dissent, the Sixth Circuit stated that plaintiffs suing Parker-Hannifin did not have to plead “meaningful benchmarks.” In that case, the defendants are seeking rehearing en banc, with organizations such as the U.S. Chamber of Commerce filing amici briefs.
While affirming an award of summary judgment in an excessive fee case, the Eleventh Circuit opined that plaintiffs have the burden of proving causation in relation to damages.
Trials: 2024 saw three trials relating to Target Date Funds (investment options designed to grow more conservative as investors age), all of which resulted in victories for defendants. Plaintiffs lost two cases involving FlexPath Target Date Funds which allegedly underperformed. Despite numerous allegations of conflicts of interest among the defendants, ultimately the two courts found no liability. At third case involving different Target Date Funds also resulted in a no liability verdict.
In another case, the sponsor won a trial in Central District of California based on a finding that there had been regular requests for information and vendor-fee benchmarking, rejecting the plaintiffs’ contention that a request for proposal was required.
Yale University’s trial victory from 2023 was subsequently appealed to the 2nd Circuit, with the ERISA Industry Committee (ERIC) and U.S. Chamber of Commerce filing amici briefs in support of Yale. Meanwhile NYU’s trial victory from 2018, which was partially reversed in 2021, is heading towards a new trial. Note that the Second Circuit is in the minority in having some decisions granting ERISA plaintiffs the right to a jury trial. The Yale plaintiffs were successful in obtaining a jury trial, while the NYU plaintiffs were not (partly based on arguments that the right had been waived).
Prohibited transaction pleading standards could be clarified: The U.S. Supreme Court has agreed to hear an appeal from the Second Circuit’s opinion in the Cornell University case. Hopefully the reasoning in the Second Circuit’s Cornell University decision, if affirmed by the U.S. Supreme Court, will help defendants by clearly placing a burden on plaintiffs to plead in the first instance the lack of a relevant exemption from the prohibited transaction rule. On the other hand, if the Supreme Court were to reverse, then the legal standard could become the one stated in the Ninth Circuit’s AT&T decision, under which plaintiffs could challenge virtually any service provider arrangement as a prohibited transaction.
For more discussion of the Cornell and AT&T cases and the legal standards discussed in those decisions, see this article.
Prediction: It seems most likely that the Supreme Court will uphold the 2nd Circuit’s decision, as the alternative would be impractical (every prohibited transaction claim would presumably survive a motion to dismiss under the AT&T standard).
The current default in the fiduciary insurance market is pressure towards flat renewals, with some ability to distinguish individual risks for reductions. However, as discussed above, there are several cases pending whose outcome could influence the market in the later half of 2025, particularly if any of the major test cases pending turn out very badly for defendants. As a result of some of the recent class action trends, some carriers may expand their applications again (many having done so already a few years ago). Still, historical perspective should be maintained, since most major fiduciary litigation trends of past decades have come and gone (such as early retirement window class actions, church plan funding cases, even public company employer stock class actions).
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
