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As a fiduciary of a retirement or healthcare plan, you bear immense responsibility—and increasingly, significant personal risk. Recent litigation trends and Department of Labor (DOL) enforcement actions have created a landscape where fiduciaries face unprecedented scrutiny and potential liability.

What many plan fiduciaries don’t realize is than less than 50% of retirement plan sponsors are fully aware of their fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA). This knowledge gap creates a dangerous situation where well-intentioned individuals may inadvertently expose themselves to personal liability.

Recent Litigation Trends Reshaping Fiduciary Risk

The 401(k) Forfeiture Litigation Wave

One of the most significant recent developments is the surge in lawsuits challenging how plan fiduciaries handle forfeitures in 401(k) plans. 2024 saw a dramatic increase in these cases, which accounted for nearly half of all new ERISA class actions.

These lawsuits allege that plan fiduciaries breach their duties when they use forfeited employer contributions to offset future employer contributions rather than to pay plan expenses that would otherwise be charged to participants. The plaintiffs argue this practice prioritizes the employer’s financial interests over those of participants—a direct violation of fiduciary duty.

While courts have delivered mixed rulings on motions to dismiss, the DOL recently weighed in for the first time, supporting a defendant plan sponsor by noting that “the established understanding for several decades has been that defined contribution plans… may allocate forfeited employer contributions to pay benefits for remaining participants rather than using those funds to defray administrative expenses.”

The Supreme Court’s Game-Changing Cornell Decision

In 2025, the Supreme Court’s unanimous decision in the Cornell University case fundamentally altered the litigation landscape for fiduciaries. The Court ruled that an ERISA prohibited transaction claim can be filed with minimal allegations that an employee benefit plan entered into a service provider contract—something necessary for every modern plan’s operation.

Justice Alito warned in his concurring opinion that this decision lowers the bar for litigation.

“The upshot is that all a plaintiff must do in order to file a complaint that will get by a motion to dismiss… is to allege that the administrator did something that, as a practical matter, it is bound to do.”

Other Emerging Litigation Trends

Beyond these developments, fiduciaries should be aware of other litigation trends:

The Harsh Reality of Personal Liability

Under ERISA, a plan fiduciary is defined as any person who exercises discretionary authority or control over plan assets or administration, or gives investment advice. Most critically, fiduciaries may be personally liable for losses and lost opportunity costs resulting from breaches of duty.
The personal liability component of ERISA is what makes fiduciary responsibility so consequential. Your personal assets—not just the company’s—could be at risk if you’re found to have breached your fiduciary duties.

The Path Forward

The fiduciary landscape continues to evolve, with courts and regulators regularly reshaping responsibilities and risks. Staying informed, implementing robust processes, and securing appropriate support and insurance are no longer optional—they’re essential components of fiduciary risk management.

Remember that fiduciary duty is not about achieving perfect outcomes; it’s about following a prudent process. By focusing on process excellence, documentation, and staying abreast of legal developments, you can fulfill your obligations while protecting yourself from personal liability.
 
This article is intended for informational purposes only and should not be construed as legal advice. Consult with qualified ERISA counsel regarding your specific circumstances.