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Welcome to Goodwin’s ERISA Litigation Update. Litigation involving ERISA-governed benefits plans has exploded in recent years. Lawyers in our award-winning ERISA Litigation practice have extensive experience litigating these cases across the country, as well as representing clients in Department of Labor investigations. The ERISA Litigation Update gathers notable developments in this space, including important court decisions and appeals as well as regulatory guidance, and provides information regarding those developments on a quarterly basis.
1. Eighth Circuit Court of Appeals Affirms Dismissal in First Forfeiture Appeal to Reach Decision
Key Takeaway: The Eighth Circuit became the first appellate court to weigh in on the wave of ERISA forfeiture lawsuits coming up through the federal courts. In Matula v. Wells Fargo & Company (No. 25-2441), the Eighth Circuit affirmed the standing-based dismissal of a challenge to Wells Fargo’s use of forfeitures to satisfy its employer contributions.
This case involved how Wells Fargo chose to reallocate prior employer contributions that departing employees forfeited before those contributions fully vested. The Wells Fargo 401(k) plan allowed those forfeited funds to be used in one of three ways: (1) to offset employer contributions, (2) to pay plan expenses, or (3) to make corrective adjustments. Plaintiff claimed that Wells Fargo’s use of forfeitures to offset employer contributions violated ERISA’s fiduciary duties and were prohibited transactions.
The Eighth Circuit rejected those claims. It held that the plaintiff failed to satisfy Article III standing because the complaint did not allege any “actual injury” to plaintiff’s account “stemming from Wells Fargo’s use of forfeited funds.” While remanding for the district court to dismiss without prejudice, the Eighth Circuit affirmed the dismissal. Goodwin represented the Chamber of Commerce of the United States of America, the ERISA Industry Committee, and the National Retail Federation, which filed a brief as amicus curiae in support of affirmance.
Around 100 lawsuits have been filed in recent years raising similar challenges to how plans have chosen to allocate forfeited employer contributions. Forfeiture appeals were recently argued in the Third and Ninth Circuits, so more decisions will soon follow.
2. Fourth Circuit Court of Appeals Holds That Incentive Compensation Program Is Not Governed by Erisa
Key Takeaway: The Fourth Circuit held that an incentive compensation program was a bonus payment plan exempt from ERISA.
On April 17, 2026, in Milligan v. Merrill Lynch (No. 25-1385), the Fourth Circuit Court of Appeals affirmed summary judgment for Merrill Lynch in a case involving its WealthChoice Award, an incentive compensation program for Merrill Lynch financial advisors. Through that program, advisors can receive monthly incentive compensation as well as long-term contingent awards based on the advisor’s production. Awards are granted annually but generally considered earned and paid eight years later if the advisor is still employed then by Merrill Lynch. Plaintiff, a former Merrill Lynch financial advisor, sued after his voluntary resignation caused the unvested awards he had been granted to be forfeited. He alleged that the program violates ERISA’s vesting and anti-forfeiture requirements and that the plan administrator had violated ERISA’s fiduciary duties. Merrill Lynch prevailed on summary judgment because the district court held that the program is not an ERISA-governed plan. Plaintiff appealed.
The Fourth Circuit affirmed. It found, as the district court had, that the program qualified as a bonus payment plan under the Department of Labor’s bonus-program regulation and was therefore not an ERISA-governed plan. That regulation exempts bonus programs from the definition of an “employee pension benefit plan” under ERISA, and the Fourth Circuit first found that the Department of Labor acted within its authority in promulgating the regulation. The Fourth Circuit then analyzed how the regulation, and case law interpreting it, applied to the Merrill Lynch program. It ruled that the program qualified as a bonus payment plan pursuant to six factors, which it noted do not need to be present in every case: The program (i) has heightened eligibility requirements, (ii) does not set aside any employee income, (iii) is not funded with money that employees would otherwise be immediately entitled to receive, (iv) generally only involves payment to current employees, (v) is not promoted as a pension plan but rather is designed to encourage advisors to remain employed by Merrill Lynch, and (vi) is determined by the advisor’s contribution to company revenue and is therefore correlated to overall firm performance.
3. Motion to Dismiss Granted in Case Challenging Stable Value Investment and Recordkeeping Fees
Key Takeaway: The district court held that the plaintiff’s investment-focused claims failed due to the lack of allegations about meaningful benchmarks and that plaintiff’s prohibited transaction claims regarding recordkeeping fees failed because payments pursuant to a contract are not ERISA transactions.
On May 19, 2026, a District of New Jersey court granted a motion to dismiss in Tedford v. Equitable Financial Life Insurance Company (No. 25-2180). The plaintiff alleged that Equitable and the fiduciaries of Equitable’s 401(k) plan breached their ERISA fiduciary duties by making available in the plan the Equitable Fixed Income Fund, a stable value investment that plaintiff alleged underperformed other stable value funds. The plaintiff further alleged that the defendants had committed prohibited transactions by causing the plan to pay excessive amounts for recordkeeping services. Defendants moved to dismiss.
The court granted the motion to dismiss in its entirety. With respect to the investment claims, the court found that allegations that the at-issue stable value fund had underperformed other stable value funds failed to permit an inference of fiduciary breach because plaintiff had failed to sufficiently plead that the alleged comparators were meaningful benchmarks for the at-issue fund. Rather, plaintiff had only alleged the purported comparator funds’ assets and utilization and not the goals and other characteristics of those funds. With respect to plaintiff’s recordkeeping-focused prohibited transaction claims, the court first disagreed with plaintiff’s contention that the recordkeeping contract violated ERISA § 406(a)(1)(C), holding that under Third Circuit law, a service provider is not a party in interest at the time it contracts to provide services. Therefore, as the court found, the claim failed because ERISA § 406(a)(1)(C) requires allegations of a transaction between the plan and a party in interest. The court likewise dismissed the ERISA § 406(a)(1)(D) claim, holding, with respect to that claim, that payments pursuant to a valid contract are not transactions under ERISA and therefore cannot be prohibited transactions.
The dismissal of plaintiff’s claims was without prejudice, and the court ordered the plaintiff to file any amended complaint within sixty days. Goodwin represented the Stable Value Investment Association, which filed a brief as amicus curiae in support of dismissal.
4. District Courts Grants Motion to Dismiss Claims Challenging Denial of Coverage of GLP-1 Drug
Key Takeaway: The court dismissed claims for denial of benefits and breach of fiduciary duty because the at-issue formulary excluded coverage for prescription drugs for weight loss.
On June 10, 2026, in Hamburger v. CareFirst BlueCross BlueShield (No. 25-3000), the U.S. District Court for the District of Columbia dismissed a putative class action complaint filed against Caremark CVS and CareFirst BlueCross BlueShield challenging the denial of insurance coverage for the GLP-1 drug Zepbound. The plaintiff’s doctor prescribed him Zepbound to treat sleep apnea, but he was denied coverage because his prescription benefit plan did not cover Zepbound. The plaintiff sued for denial of benefits and breach of fiduciary duty under ERISA.
The court dismissed both claims. As to the benefits denial claim, the court found that the formulary specifically excluded coverage for prescription drugs for weight loss, and ERISA requires benefits plans to “be enforced as written.” In other words, the defendants “did not breach their fiduciary duty in doing what” plaintiff’s plan required. The court also dismissed his breach of fiduciary duty claim, which he brought under ERISA § 502(a)(3). The court recognized that ERISA § 502(a)(3) is a “catchall” that offers equitable relief only for injuries for which ERISA § 502 does not otherwise offer an adequate remedy. Because the gravamen of the plaintiff’s complaint was that he was improperly denied benefits, the remedies for that claim would make him whole if he were to prevail, and ERISA does not allow a plaintiff to “double dip.”
5. Recent Events
Speaking engagement: 2026 NAPA 401(k) Summit (April 19 – 21, 2026)
Jamie Fleckner spoke on a panel titled “ERISA Litigation Applied to Your Practice,” which broke down the hottest trends in ERISA litigation, explained what the courts are saying (and where the circuits differ), and translated those rulings into actionable insights for plan advisors.
Speaking engagement: DCIAA/EBRI/SPARK Public Policy Forum (June 4 – 5, 2026)
Jamie Fleckner moderated the Views on the Current Litigation Environment: Health Benefit Litigation session at the DCIAA Public Policy Forum, which featured policymakers, legislative and regulatory experts, and industry leaders discussing timely topics related to retirement and public policy.
6. Recent Insights
Client Alert: Department of Labor Proposes New Regulatory Safe Harbor for Prudent Selection of Designated Investment Alternatives in Participant-Directed Individual Account Plans (April 24, 2026)
Jamie Fleckner, Patrick S. Menasco, Bibek Pandey, Jeremy I. Senderowicz, and Hasan Cetin co-authored a client alert regarding the U.S. Department of Labor’s proposed detailed guidance on the prudential selection of designated investment alternatives (DIAs) for participant-directed individual account plans.
Client Alert: Supreme Court Rules That Section 47(b) of the Investment Company Act of 1940 Provides No Private Right of Action (June 12, 2026)
Michael K. Isenman, Jamie Fleckner, Charles A. Brown, and Jeremy I. Senderowicz co-authored this client alert regarding the Supreme Court’s ruling that Section 47(b) of the Investment Company Act of 1940 (ICA), which governs mutual funds and other registered investment companies, does not provide private parties with a right to sue others for violations of the ICA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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