America’s private retirement system is one of the great successes of a market-based economy. Employer-sponsored retirement plans have helped millions of workers build long-term financial security thanks to the strength and resilience of our capital markets.
But our retirement system is under growing strain from abusive litigation and regulatory overreach.
A key component of the retirement system is the Employee Retirement Income Security Act of 1974 (ERISA). That law in part regulates the responsibilities of private-sector employers providing retirement benefits.
ERISA sets requirements on reporting and disclosure, as well as fiduciary standards for retirement plans. The law also establishes an enforcement mechanism that authorizes civil actions to protect its provisions.
While ERISA’s enforcement procedures were designed to safeguard workers from genuine abuses by plan fiduciaries and its service providers, a surge of litigation, especially excessive-fee and underperformance lawsuits, has reached a point of diverting resources away from workers’ retirement—often without any meaningful showing of wrongdoing.
Under current law, plaintiffs can bring sweeping lawsuits against retirement plans based on little more than hindsight comparisons or allegations that fees were “too high.” Unfortunately, courts have been generally reluctant to dismiss these cases early, even when the suits are baseless. After the initial stage, plan sponsors are forced into an expensive legal discovery process even when the claims against them are weak.
That process can cost millions of dollars, a financial burden that creates significant pressure on companies to settle weak lawsuits simply to avoid the expense and disruption.
According to financial publication Pensions & Investments, “Litigation is an expensive exercise in defending programs, which siphons funds and sponsors' time that could be used to improve participants' savings by exploring innovative products and expanding services.”
In other words, the workers who participate in retirement plans targeted for these types of lawsuits are harmed.
Pensions & Investments also notes that “more firms are filing copycat complaints, hoping a receptive judge will allow their lawsuit to get past the motion-to-dismiss stage leading to an eventual settlement.”
Indeed, lawsuits alleging supposed excessive-fee and under performance have risen dramatically, and the lawsuit scourge is spreading to other retirement plan issues.
Many of the suits are strikingly similar in structure and substance. Cases feature boilerplate allegations, broad comparisons to other plans, and settlements driven by litigation costs rather than proven fiduciary failures.
Runaway litigiousness is not accountability. Trial lawyers enrich themselves by seeking volume over validity, casting aside the interests of the plan participants—the people who are supposedly being protected. The real winners are attorneys, who collect massive fees even as participants receive modest payments.
For example, the National Institute of Pension Administrators added up results for breach of fiduciary duty lawsuits for 2009 to 2016. In cases during that time, attorneys representing plaintiffs pocketed about $204 million. And the plan participants? They each received an average of $116 (not million, to be clear).
Another recent analysis found that in the 27 settlements of fee and underperformance cases in 2025, the median per-participant award was just $67.79 compared to an average plaintiffs’ attorneys’ fees amount of $1.59 million.
The broader impact on workers’ retirement plans compounds the problem. Litigation risk acts as a hidden tax on employers, driving up costs, discouraging innovation, and distorting management decisions. Rather than focusing on offering competitive investment options, expanding access, or improving financial education, plan sponsors are increasingly forced to manage legal exposure.
In fact, a recent survey found that 89% of plan sponsors report that the risk of litigation is very, or at least a somewhat, significant factor affecting their decisions to enhance services or adding investment options.
Naturally, smaller and mid-sized employers with less resources than corporate giants are particularly vulnerable. An unpredictable and hostile legal environment is certainly a disincentive to employers offering a retirement plan to begin with. Fewer plans, fewer choices, and fewer opportunities for workers to build wealth is the exact opposite of what ERISA was meant to achieve.
While a recent Supreme Court ruling has made the situation worse, thankfully Congress can address this issue. A targeted, approach would some restore balance to the legal framework for lawsuits in these cases.
As things stand, plaintiffs can survive a motion to dismiss by stating that a plan hired an outside service provider and simply alleging—without any facts—that the fees were too high.
A legislative fix introduced would clarify that plaintiffs must plead specific facts showing that a plan sponsor acted imprudently or engaged in prohibited conduct before a case can proceed. In plain terms, trial lawyers should show their work before a case moves on to the discovery process.
Requiring specificity and establishment of a plausible claim at the outset of legal proceedings discourages meritless cases that are a drag on economic opportunity and financial stability for workers in private retirement plans. Policymakers should embrace this commonsense approach.
Markets function best when rules are clear, incentives are properly aligned, and bad actors are punished. It is possible to enact simple reforms that protect workers’ legitimate interests against actual wrongdoing, while pushing back against excessive litigation that is presented as consumer protection, but in reality hurts everyday Americans who are struggling to build a secure retirement.
