3 ERISA Litigation Trends to Keep Your Eye On

Recent ERISA court decisions and federal policies are changing retirement plan litigation. New Supreme Court rulings have lowered the bar for certain claims, while federal agencies are pushing to expand the types of investments available in 401(k) plans. At the same time, courts remain divided on what plaintiffs must show at the outset of a case, making the early stages of ERISA litigation unpredictable.

Here are 3 trends in ERISA litigation worth monitoring:

1. Easier prohibited transaction claims after the decision in Cunningham v. Cornell
2. The push to open retirement plans to private equity and other alternatives
3. The unsettled standards for pleading investment and fee challenges, illustrated by the Parker-Hannifin case.

1. Easier ERISA Prohibited Transaction Claims After Cornell Ruling

In Cunningham v. Cornell University, employees sued Cornell’s retirement plan for using plan assets to pay recordkeeping fees to TIAA and Fidelity. Under ERISA Section 406, such transactions with a party in interest (in this case, outside service providers) are per se prohibited unless an exemption applies. Cornell argued the plaintiffs hadn’t shown the fees were unreasonable, and lower courts dismissed the prohibited transaction claim for not pleading that detail. 

However, in April 2025 the US Supreme Court unanimously reversed, holding that an ERISA plaintiff need only allege the elements of a prohibited transaction itself, not negate the exemptions, to state a claim. The Court reasoned that the statutory exemptions in ERISA §408 are written as affirmative defenses, so plaintiffs are not required to preemptively plead their inapplicability.

Implications of the Ruling

The Cornell ruling is a clear win for the plaintiffs’ bar, removing a procedural hurdle that often thwarted claims early. Plan sponsors had warned that making it so easy to plead a prohibited transaction would subject defendants to costly and time-intensive discovery and encourage meritless suits. Indeed, the Supreme Court acknowledged concerns about untoward practical results, essentially, that virtually any plan hiring a vendor (which every plan does) could face a lawsuit surviving the pleadings stage. The justices noted tools like Rule 7 replies, Rule 11 sanctions, and fee-shifting as safety valves against truly frivolous cases. 

So far, there hasn’t been a flood of standalone prohibited transaction suits post-Cornell. Plaintiffs still must allege concrete injury, typically by showing excessive fees. The key takeaway: it’s now easier to survive dismissal and push fiduciaries into discovery. Attorneys should take advantage of the lowered bar but still be ready to demonstrate real excess fees or conflicts as cases proceed.

Nonetheless, Cornell undoubtedly makes it easier for participants to survive dismissal and force plan fiduciaries to justify their fees under the microscope of discovery. Plaintiff attorneys should leverage this lowered bar, but also be prepared to demonstrate actual excess fees or conflicts to strengthen their case as it proceeds.

2. Opening Retirement Plans to Private Equity: Trump’s Executive Order

A second trend is the push to allow alternative investments like private equity, hedge funds, real estate, and cryptocurrency in 401(k) plans. Historically, such plans stuck to mutual funds and other transparent investments due to fiduciary concerns. Prior administrations sent mixed signals on private equity, but in 2025, President Trump signed an Executive Order titled “Democratizing Access for 401(k) Investors,” which expands access to alternative assets.

The order does not itself change ERISA law, but directs agencies to lay the groundwork for broader use of alternatives. It calls on the Department of Labor to revisit fiduciary guidance and consider safe harbors, while urging the Securities and Exchange Commission to ease restrictions on investor eligibility. Regulators are encouraged to coordinate efforts to expand investment menus.

Monitoring the Impact

Trump’s order could introduce new plan offerings and litigation. On one hand, plan sponsors are clearly intrigued, as the order encourages alternative investments, and industry players are likely to develop more products (funds, trusts, etc.) that bundle private equity or digital assets for 401(k) plans. Over time, more plans may begin sprinkling in these non-traditional investments. 

On the other hand, the core fiduciary standard under ERISA remains unchanged: no matter what new assets are allowed, fiduciaries must prudently vet them, understand their risks, and act in participants’ best interests. But alternative assets bring unique challenges, like illiquidity, opaque valuations, higher fees, and volatility, which could expose plan decision-makers to increased scrutiny if things go wrong. 

In the meantime, plaintiffs’ firms should be prepared to challenge poorly executed forays into alternative investments, while also staying abreast of new rules that could affect pleading or proof in such cases. 

3. ERISA Pleading Standards in Flux: The Parker-Hannifin Case

Courts are divided on what plaintiffs must show at the start of an ERISA case challenging 401(k) plan investments or fees. 

A recent example is Johnson v. Parker-Hannifin Corp, where employees claimed their 401(k) plan kept underperforming target-date funds. The district court dismissed the case, saying the plaintiffs didn’t use a fair comparison. But the Sixth Circuit reversed the ruling, holding that ERISA does not require a “meaningfully similar” benchmark at the pleading stage. This makes it easier for plaintiffs in that circuit to survive dismissal, even if comparisons involve different strategies or risk levels.

Other federal appeals courts have taken a stricter approach, requiring plaintiffs to use apples-to-apples comparisons. The result is a split: in some jurisdictions broad performance comparisons are enough, while in others detailed, contextual benchmarks are required.

The Split and the Parker-Hannifin Decision

‍In November 2024, the Sixth Circuit sided with the plaintiffs. In a 2–1 decision, it held that ERISA does not require plaintiffs to plead a “meaningfully similar” benchmark at the outset. The majority said that fiduciaries could be second-guessed for failing to choose top-performing investments, even if those investments took on more risk than the plan’s chosen option. In dissent, Judge Readler warned that ERISA’s focus is on “standards of conduct, not standards of performance,” and cautioned that the ruling “open[ed] the door” to speculative lawsuits using hindsight and unfair comparisons. This divergence reflects a broader circuit split:

• Lenient Standard (Sixth Circuit): Johnson v. Parker-Hannifin now stands for the proposition that a plaintiff can survive dismissal by comparing a plan fund’s returns to virtually any higher-performing fund or index, even if the risk profile or strategy differs, and infer imprudence from underperformance. The Sixth Circuit did not demand a like-for-like comparator at pleading time, making it easier for such cases to proceed.
  
  
• Strict “Meaningful Benchmark” Standard (Several Other Circuits): In contrast, at least 3 circuits, the Seventh, Eighth, and Tenth, require plaintiffs to plead a proper benchmark comparison when alleging an investment was imprudent. For example, the Seventh Circuit has dismissed claims that failed to show a fund underperformed relative to a comparable alternative with similar objectives. The Eighth and Tenth have taken a similar approach, insisting on contextual performance allegations rather than simple rankings. 

High Court to Weigh In?

Parker-Hannifin has petitioned the Supreme Court to set a uniform rule. If the Court endorses the stricter standard, plaintiffs will need more detailed pleadings up front. If it affirms the Sixth Circuit’s lenient approach, more cases will survive dismissal nationwide. Either way, clarity is coming, and plaintiff attorneys should continue to plead detailed facts while watching for a nationwide standard.

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