Recently, federal appellate courts have begun tightening the pleading standards for ERISA breach of fiduciary duty claims based on the fees or performance of funds in 401(k) and 403(b) plans. To state a viable claim based on fees or performance, a plaintiff must, among other things, allege “a meaningful benchmark” against which to compare the cost and performance of the plan’s funds. Many courts will reject a proposed benchmark unless it (1) provides an “apples” to “apples” comparison to funds with similar investment aims and strategies and (2) reflects the market generally, as opposed to cherry-picked examples of funds with lower fees or higher returns.

Despite this heightened standard, many recent excessive fees cases are surviving Rule 12 motions to dismiss. According to Euclid Fiduciary’s Mid-Year Review of Excess Fee and Performance Litigation, the “actual year-to-date results [through July 31, 2023] reveal that plan sponsors are only winning approximately 30% of dismissal motions— even less than the 35% success rate from the prior year.” Euclid also notes that “only 17% of cases in 2023 have been dismissed with prejudice.”

As these cases work their way through discovery, we should see an increasing number of summary judgments decisions. We will cover those decisions here.