A recent report noted the number of ERISA class action lawsuits filed in 2010 increased from 8,944 to 9,038, and that growth in this area of litigation is expected to continue in 2011.
Employee Retirement Income Security Act (ERISA) of 1974 is a federal law that sets minimum standards for pension and health plans offered by private businesses to their employees. ERISA was designed to protect employees who participate in such plans.
Under ERISA laws, the people responsible for overseeing employee benefits plans (often referred to as fiduciaries) must follow specific guidelines. These include acting in the best interests of the plan participants; providing participants with plan information, including information about plan features and funding; and providing a grievance and appeals process for participants. Breaches of fiduciary duty can result in a lawsuit being filed against plan fiduciaries.
According to the report, Workplace Class Action Report 2011 Edition, published by Seyfarth Shaw, the increase and projected continued growth is based on several factors. First, negative economic conditions adversely affected the value of many investment plans. This was enhanced by the collapse of the sub-prime mortgage market, on which some investment packages relied.
As a result of the economic downturn, some employers may attempt to decrease employee benefits in order to save money, which may result in more ERISA lawsuit filings, the report states.
Additionally, there is work underway by the Department of Labor to change the definition of what constitutes a fiduciary. The change, if implemented, would broaden the definition of fiduciary to include those individuals who give advice and receive a fee for that advice, even if the advice is given infrequently. Currently, a person is considered a fiduciary only if he or she gives advice about a plan’s investments on a regular basis.
For more information about ERISA, visit the Department of Labor online.
Source: Lawyers & Settlements.com