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ERISA litigation spike since 2020 raises risks for plan sponsors
More than 60 forfeiture-related cases are challenging long-standing IRS guidance on how sponsors can use forfeited defined-contribution funds, while AI-assisted filing is driving faster, cheaper lawsuits.
A sharp rise in ERISA litigation since 2020 is creating new compliance and risk exposure for retirement plan sponsors, according to Bonnie Treichel, founder of Endeavor Retirement and Endeavor Law, speaking with Insurance Business America.
Treichel said the plaintiff bar has expanded beyond a small set of dominant firms, and AI-assisted document review has lowered the cost of filing ERISA cases, which has helped increase litigation volume and left sponsors and their benefits brokers on defense.
One major example is a forfeiture litigation wave, with more than 60 cases now challenging what had been treated as settled law for roughly 30 years under IRS guidance, specifically how plan sponsors can use forfeited funds within defined contribution plans.
She also warned that heightened litigation risk is making sponsors more reluctant to adopt new plan features, with potential knock-on effects for brokers advising on designs such as emergency savings, auto-enrollment enhancements, and financial wellness integrations.