ERISA class action settlements reach almost $1 billion

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Class action lawsuit settlements skyrocketed this past year, with a record $2.72 billion paid by employers for litigation that pertained to employment discrimination, wage hours, ERISA statutory and government enforcement cases, according to Seyfarth Shaw’s Workplace Class Action Litigation Report for 2018.

Of the $2.7 billion in total settlements, $927.8 million came from ERISA cases. From the 1,408 cases evaluated, Seyfarth Shaw has identified key trends within the past ERISA cases that employers need to watch for in 2018.

There were two primary trends in ERISA class action litigation in 2017. The first was the U.S. Supreme Court issued a significant decision relating to the parameters of what is known as the church plan exemption to ERISA.

ERISA generally requires private companies’ defined benefit pension plans to satisfy funding rules. Typically, the plan must be at least 80% funded to avoid special penalties and limitations.

These rules do not apply to state or local governments or churches. In 1980, Congress added language to pull certain church-affiliated organizations into the definition of “church” for funding purposes.

In the Advocate Health Care Network v. Stapleton case on June, 5 2017, the Supreme Court’s ruling determined that pension plans that otherwise meet the definition of a church plan under ERISA can qualify for the exemption without being established by a church.

The decision was the culmination of a wave of ERISA class actions brought by employees of religiously affiliated non-profit hospitals who asserted that the employers improperly claimed their pension plans were ERISA-exempt church plans.

Although the decision settled one of the major questions in church plan litigation, a second wave of these cases may be starting as the plaintiffs’ action bar attempts to challenge the religious bona fides of these principal purpose organizations.

Also see:10 regulatory issues facing small employers in 2018.”

The second trend in ERISA class action litigation for 2017 was the plaintiffs’ class action bar filed an influx of new 401(k) and 403(b) fee and investment lawsuits against various employers, with a particular concentration on institutions of higher education.

The university ERISA lawsuits challenge the design model of their 403(b) retirement plans, and the payment of allegedly excessive fees for record-keeping and administrative services. Many of these cases remain active and rulings are expected throughout 2018.

Corporate counsel can also expect to see further litigation regarding the reasonableness of 401(k) and 403(b) plan fees and expenses in the numerous class action lawsuits pending around the country on these issues.

Potential confusion

Courts are likely to continue to grapple with the complicated and intertwined issues related to who has standing to bring claims under ERISA and when those claims accrue.

In the health and welfare space, plan sponsors can expect some potential confusion if Congress and the Trump Administration continue to take up the repeal and replace of the ACA.

Employers have spent years preparing for and then implementing the ACA. The potential changes again to health coverage may cause some complications among plan participants, which could lead to an increase in class action litigation if the participants remain unsure about their applicable coverage for various benefits.

Various network providers have challenged the reimbursement rates from insurers and plans, dragging both administrators and plans into numerous litigation matters.

Given the uncertainty in the future of the ACA and the continuing disputes between insurers and out-of-network providers, it is anticipated that this variety of class action litigation will increase in 2018, according to Seyfarth Shaw’s Workplace Class Action Litigation Report.

A fight in the courts is expected regarding the DOL’s recently issued final regulations on disability plan administration. These regulations change the landscape for the handling of disability claims through the frequently offered long-term disability benefits.

These regulations are apt to be challenged in the courts, given their sweeping and onerous changes. Insurers and plan sponsors need to watch the litigation and its potential results closely.

If the regulations do go into effect, plan administrators will need to closely examine them to ensure compliance. Additionally, the implementation of these regulations could spur class action lawsuits and DOL enforcement actions if they are not handled appropriately on a plan basis.

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