401(k) Settlements Highlight ERISA Litigation Divide

Individual plan participants entangled in 401(k) excessive-fee and investment-underperformance lawsuits had a median recovery of just $67.79 in 2025, even as law firms representing plaintiffs averaged $1.59 million per case in fees, according to an analysis of settlement data.

The data, compiled by Davis & Harman, a law firm that defends employers, includes 27 Employee Retirement Income Security Act-related settlements by defined contribution plan sponsors in underperformance and excessive-fee complaints.

While supporters of such complaints argue that litigation (and the threat of litigation) deter misconduct and force better plan practices, critics say the figures show workers gain little, while employers face mounting costs that ultimately shrink retirement benefits and plan services.

Supreme Court Fallout

Perhaps the main point of contention in the current argument relates to the pleading standards established in the Supreme Court’s 2025 Cunningham v. Cornell ruling, which allows plaintiffs to survive motions to dismiss merely by alleging that a “prohibited transaction” occurred. Employer groups have warned that the new standard is low and has led to more “frivolous” litigation, while others argue that the standard protects participants.

The dispute has garnered the attention of members of Congress: A subcommittee of the U.S. House Committee on Education and Workforce held a hearing in December 2025 titled: “Pension Predators: Stopping Class Action Abuse Against Workers’ Retirement.” During the hearing, Andrew Salek-Raham from Groom Law Group; Lynn Dudley from the American Benefits Council; and Glenn Butash, chair of the ERISA Industry Committee Legal Center, argued that many complaints—both before and after the Supreme Court’s unanimous decision in Cunningham—are frivolous and meritless.

Meanwhile, William Alvarado Rivera, senior vice president of litigation at the AARP Foundation, defended the Cunningham standard, saying, “There is no question that strong enforcement of ERISA has led to better outcomes for plan participants and savers. This is a feature, not a bug, to have private enforcement to ensure fiduciary duties are kept.”

Kent Mason, a partner in Davis & Harman who advises employers and helped prepare the firm’s data survey, says the lower pleading standards and low settlement amounts per participant highlight what he sees as a fundamental imbalance in the system.

“The participants are generally not winning any material amounts,” Mason says. “They’re not being awarded anything that adds meaningfully to retirement security, but the litigation costs and attorneys’ fees are very real—and they come out of compensation budgets.”

Significant Fees

According to the Davis & Harman analysis, attorneys’ fees consumed an average of 33% of each settlement, with some cases delivering single-digit dollar recoveries to participants. Attorneys typically receive 30% to 40% of settlement totals, typical in all litigation, not just ERISA complaints.

In one case, Dukes v. AmerisourceBergen Corp., settled in 2025, workers averaged $5.85 each, while legal fees totaled more than $200,000. Mason said those dynamics ripple outward, driving up fiduciary insurance costs and pushing employers toward including “more vanilla” investment options in their plans to minimize legal risk, rather than trying to maximize participant outcomes.

“Many plan sponsors are no longer asking what’s best for participants,” Mason says. “They’re asking, ‘How do we avoid getting sued?’ And that’s a lose-lose for retirement savings.”

‘Litigation … Holds Them Accountable’

Andrew Schlichter, co-managing partner in Schlichter Bogard LLC, a firm known for its successes in pro-plaintiff ERISA litigation, pushed back strongly on that characterization, arguing that focusing narrowly on average dollar recoveries misses the broader impact of the cases. He says there is wide variation in the quality of lawsuits and in their outcomes—and that his firm’s cases often include significant non-monetary relief.

“If you’re a fiduciary, your North Star has to be the best interests of participants,” Schlichter says. “When fiduciaries fail to act in participants’ best interests, litigation both holds them accountable and makes plan participants whole through monetary relief and changes to [the] way in which plans operate.”

Schlichter points to cases that went to trial or extracted behavioral, rather than monetary, commitments as evidence that litigation can deliver meaningful results, both by compensating workers and by influencing industry practices beyond a single employer. He also rejects assertions of excessive litigation, saying firms have no incentive to bring weak cases they expect to lose.

For example, Schlichter’s firm represented plaintiffs in a complaint against Pentegra’s multiple employer plan, settling for $48.5 million in 2025. Using Davis & Harman’s methodology, which divides the net settlement award after lawyers’ fees by the number of participants, the per-participant award was approximately $1,138.

Similarly, in Andrew-Berry v. Weiss, which resulted in a $7.9 million settlement with the GWA LLC 401(k) Profit Sharing Plan, the per-participant settlement award was more than $16,000 per participant, according to Davis & Harman.

Initial Motion Often Determines Outcome

While most settlements resulted in low per-participant awards, several factors influenced how much participants ultimately receive, such as the duration of the litigation and the severity of allegations, as in any legal dispute.

However, Mason says most settlements do not require substantive plan changes and are driven instead by the economics of litigation. He says employers often settle after motions to dismiss are denied because discovery alone can cost $5 million to $10 million, making even multi-million-dollar settlements the cheaper option.

“The motion to dismiss is generally the whole ballgame,” Mason says, echoing concerns raised by some judges. “Once it’s denied, settlement becomes the rational choice—and that encourages more lawsuits.”

Both sides agree the stakes extend beyond individual cases. Mason, for one, warns that continued fee-related litigation could discourage employers from sponsoring 401(k) plans altogether, instead pushing them toward simpler payroll-deduction individual retirement accounts with fewer fiduciary obligations.

Schlichter, by contrast, says the solution is straightforward: better fiduciary conduct, not fewer lawsuits.

“Fiduciaries have to do what’s in the best interest for participants,” Schlichter says. “It’s not hard to fulfill that obligation.”