[House Hearing, 119 Congress]
[From the U.S. Government Publishing Office]
PENSION PREDATORS: STOPPING CLASS ACTION
ABUSE AGAINST WORKERS' RETIREMENT
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HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH,
EMPLOYMENT, LABOR, AND PENSIONS
OF THE
COMMITTEE ON EDUCATION AND WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINETEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD IN WASHINGTON, DC, DECEMBER 2, 2025
__________
Serial No. 119-33
__________
Printed for the use of the Committee on Education and Workforce
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via: edworkforce.house.gov or www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
64-244 PDF WASHINGTON : 2026
=======================================================================
COMMITTEE ON EDUCATION AND WORKFORCE
TIM WALBERG, Michigan, Chairman
JOE WILSON, South Carolina ROBERT C. ``BOBBY'' SCOTT,
VIRGINIA FOXX, North Carolina Virginia,
GLENN THOMPSON, Pennsylvania Ranking Member
GLENN GROTHMAN, Wisconsin JOE COURTNEY, Connecticut
ELISE M. STEFANIK, New York FREDERICA S. WILSON, Florida
RICK W. ALLEN, Georgia SUZANNE BONAMICI, Oregon
JAMES COMER, Kentucky MARK TAKANO, California
BURGESS OWENS, Utah ALMA S. ADAMS, North Carolina
LISA C. McCLAIN, Michigan MARK DeSAULNIER, California
MARY E. MILLER, Illinois DONALD NORCROSS, New Jersey
JULIA LETLOW, Louisiana LUCY McBATH, Georgia
KEVIN KILEY, California JAHANA HAYES, Connecticut
MICHAEL A. RULLI, Ohio ILHAN OMAR, Minnesota
JAMES C. MOYLAN, Guam HALEY M. STEVENS, Michigan
ROBERT F. ONDER, Jr., Missouri GREG CASAR, Texas
RYAN MACKENZIE, Pennsylvania SUMMER L. LEE, Pennsylvania
MICHAEL BAUMGARTNER, Washington JOHN W. MANNION, New York
MARK HARRIS, North Carolina ADELITA S. GRIJALVA, Arizona
MARK B. MESSMER, Indiana
RANDY FINE, Florida
R.J. Laukitis, Staff Director
Veronique Pluviose, Minority Staff Director
------
SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR, AND PENSIONS
RICK ALLEN, Georgia, Chairman
ROBERT F. ONDER, Jr., Missouri MARK DeSAULNIER, California,
JOE WILSON, South Carolina Ranking Member
VIRGINIA FOXX, North Carolina JOE COURTNEY, Connecticut
JAMES COMER, Kentucky DONALD NORCROSS, New Jersey
BURGESS OWENS, Utah LUCY McBATH, Georgia
LISA C. McCLAIN, Michigan JAHANA HAYES, Connecticut
MICHAEL A. RULLI, Ohio GREG CASAR, Texas
RYAN MACKENZIE, Pennsylvania SUMMER L. LEE, Pennsylvania
MICHAEL BAUMGARTNER, Washington JOHN W. MANNION, New York
RANDY FINE, Florida MARK TAKANO, California
C O N T E N T S
----------
Page
Hearing held on December 2, 2025................................. 1
OPENING STATEMENTS
Allen, Hon. Rick, Chairman, Subcommittee on Health,
Employment, Labor, and Pensions............................ 1
Prepared statement of.................................... 3
DeSaulnier, Hon. Mark, Ranking Member, Subcommittee on
Health, Employment, Labor, and Pensions.................... 4
Prepared statement of.................................... 7
WITNESSES
Salek-Raham, Mr. Andrew, Principal, Groom Law Group.......... 9
Prepared statement of.................................... 11
Dudley, Mrs. Lynn, Senior Vice President, Global Retirement
and Compensation Policy, American Benefits Council......... 19
Prepared statement of.................................... 20
Rivera, Mr. William Alvarado, Senior Vice President of
Litigation, AARP Foundation................................ 27
Prepared statement of.................................... 29
Butash, Mr. Glenn, Chair, ERIC Legal Center.................. 70
Prepared statement of.................................... 72
ADDITIONAL SUBMISSIONS
Chairman Allen:
Letter dated December 11, 2025, from U.S. Chamber of
Commerce............................................... 111
Statement dated December 2, 2025, from the American
Retirement Association (ARA)........................... 123
Letter dated December 2, 2025, from the National Retail
Federation (NRF)....................................... 129
Statement dated December 2, 2025, from Stable Value
Investment Association (SVIA).......................... 131
Courtney, Hon. Joe, a Representative in Congress from the
State of Connecticut:
Article dated June 2025, from jonesday.com, entitled
``U.S. Supreme Court Encourages Federal Rule 7(a)(7)
Replies--A Potential Boon for Defendants''............. 100
Fine, Hon. Randy, a Representative in Congress from the State
of Connecticut:
Statement dated December 2, 2025, from the American
Retirement Association (ARA)........................... 134
Letter dated November 25, 2025, from the ESOP Association 140
Letter dated December 2, 2025, from the Investment
Company Institute (ICI)................................ 142
Walberg, Hon. Tim, a Representative in Congress from the
State of Michigan:
Letter dated December 2, 2025, from the Institute for
Portfolio Alternatives (IPA)........................... 144
PENSION PREDATORS: STOPPING CLASS
ACTION ABUSE AGAINST WORKERS' RETIREMENT
----------
Tuesday, December 2, 2025
House of Representatives,
Subcommittee on Health, Employment, Labor, and
Pensions,
Committee on Education and Workforce,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:15 a.m., in
Room 2175 Rayburn House Office Building, Hon. Rick Allen
(Chairman of the Subcommittee) presiding.
Present: Representatives Allen, Onder, Foxx, Mackenzie,
Fine, Walberg, DeSaulnier, Courtney, McBath, Hayes, Lee,
Mannion, and Scott.
Staff present: Vlad Cerga, Director of Information
Technology; Halle Greenbaum, Staff Assistant; Libby Kearns,
Press Assistant; Katerina Kerska, Legislative Assistant; Trey
Kovacs, Director of Workforce Policy; Campbell Ladd, Clerk;
R.J. Laukitis, Staff Director; Danny Marca, Director of
Information Technology; John Martin, Deputy Director of
Workforce Policy/Counsel; Audra McGeorge, Communications
Director; Ethan Pann, Deputy Press Secretary and Digital
Director; Kane Riddell, Staff Assistant; Sara Robertson, Press
Secretary; Katherine Anne Russo, Director of Member Services
and Coalitions; Ann Vogel, Director of Operations; Joe Wheeler,
Professional Staff Member; Thomas White, Deputy Clerk; James
Whittaker, General Counsel; Jeanne Wilson, ERISA Counsel;
Damian Arambula, Minority Intern; Natalie Glezen, Minority
Running Start Fellow; Christian Haines, Minority General
Counsel; Carrie Hughes, Minority Director of Health & Human
Services Policy; Stephanie Lalle, Minority Communications
Director; Raiyana Malone, Minority Press Secretary; Kevin
McDermott, Minority Director of Labor Policy; Marie McGrew,
Minority Press Assistant; Eleazer Padilla, Minority Staff
Assistant; Veronique Pluviose, Minority Staff Director; Banyon
Vassar, Minority Director of IT.
Chairman Allen. I wanted to get by to speak to you before
we started, but things got a little busy this morning, but
thank you for being here. The Subcommittee on Health,
Employment, Labor and Pensions will come to order. I note that
a quorum is present.
Without objection, the Chair is authorized to call a recess
at any time. Today's hearing is about protecting retirement
savings of American workers, employers who voluntarily maintain
retirement savings and other employee benefit plans from
baseless predatory class action lawsuits.
Employer sponsored retirement plans are the backbone of the
American retirement. Employer sponsored healthcare and other
plans provide important benefits to American workers and their
families. The Employer Retirement Income Security Act, ERISA,
helps protect retirement, health and other benefits for more
than 155 million workers, retirees, and their family members.
All together these plans hold more than 14 trillion helping
millions of Americans save for the future and stay financially
secure. These assets represent the savings and contributions of
workers and their employers, but make no mistake, such a large
pool of assets is attracting predatory lawyers, who are
targeting employee benefit plans for easy, quick money, sue and
settle lawsuits.
Under the Biden Harris administration, inflation and the
cost of living rose dramatically, throwing many Americans into
financial jeopardy. On top of that, predatory class action
attorneys are targeting employers who fund retirement, health,
and other workplace benefits for their workers, putting jobs
and financial security at risk.
In stark contrast Committee Republicans have been working
to ensure that America savers are protected. My bill to ensure
the investment fiduciaries are focused on maximizing returns
for ERISA plan investments, rather than on woke ESG factors
passed the Committee earlier this year.
Congressman Fine has introduced legislations with solutions
of the problem that we will hear about today. I look forward to
discussing this bill, and other efforts to protect ERISA plan
participants, and their benefit plans.
I want to thank our witnesses today who have front line
experience sending off meritless, quick money lawsuits from
class action attorneys. We will hear today how benefit plans,
the employers who offer them, and plan managers are being
targeted by attorneys looking for big payouts.
We will also ask an important question. Are these lawsuits
helping American workers, or just lining the pockets of trial
lawyers? We will also hear how these lawsuits are changing the
way ERISA plans work, and what that means for the benefits that
American workers rely on.
With that, I yield to the Ranking Member for an opening
statement.
[The prepared statement of Chairman Allen follows:]
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Mr. DeSaulnier. Thank you, Mr. Chairman, and thank you to
our witnesses for being here today. Workers deserve to earn a
decent wage, provide for themselves and their families and
retire with dignity. It is the American way when we do it
right. Right now they are facing an economy that is not working
for them and for most Americans.
Jobs numbers released last month show that the Trump
administration presided over two consecutive months of job loss
this year while consumer prices continued to go up. This
represents the first monthly job losses since the first Trump
administration. At the same time, we remain deeply concerned
about the Subcommittee's agenda, particularly its focus on
prioritizing the interest of corporations over American workers
and their retirement security.
Excuse me. Apparently, something is going on with my
security system 3,000 miles away, but I am sure it is not you
Mr. Chairman, probably Mr. Walberg. In July, the Subcommittee
held a hearing examining the Department of Labor's Employee
Benefit Security Administration known as EBSA, pronounced EBSA,
which is a vital agency that helps workers' hard-earned health
and retirement benefits.
Regrettably, EBSA has remained underfunded and understaffed
for years, and the Trump administration's Fiscal Year 2026
budget only makes things worse. Against this backdrop the
Subcommittee is seeking to undermine retirement savers' legal
right to obtain justice in Court. No one wants frivolous
lawsuits, but if we follow the regulations and fund the
investigators and the enforcement arm, we would not have to
deal with lawsuits.
Under the Employee Retirement Income Security Act, known as
ERISA, workers have a legal right to bring claims in Federal
Court. Over the years workers have filed cases alleging
misconduct by retirement plan sponsors, such as charging
excessive fees or offering risky investments, which can sharply
reduce workers' retirement savings.
I expect this morning's hearing will focus on the recent
Supreme Court case entitled Cunningham versus Cornell
University. This case involved 28,000 Plaintiffs who allege
that their retirement plans paid several times more in fees
than they should have paid.
The technical issue in this case was whether Plaintiffs
need to allege more than that violation occurred to survive a
motion to dismiss. The Supreme Court unanimously ruled that
they did not. This ruling ensured that the very point of ERISA
to protect benefits is realized. In the months that have
followed the Supreme Court's unanimous decision, there has not
been any spike in ERISA litigation as some feared.
One major law firm that defends corporations acknowledged
that the decision, ``Has not yet resulted in material increase
in record keeping, fee challenges, or ERISA excessive fee
lawsuits.'' Based on the title of today's hearing, I suspect we
will hear a lot about so-called frivolous ERISA class action
litigation. According to the congressional Research Service,
there were 586 class actions filed between 2020 and 2024, which
represents just a miniscule fraction of the over 800,000
private sector retirement plans.
Despite these facts, Committee Republicans recently
introduced legislation that functionally overturns the
unanimous Supreme Court decision in Cunningham versus Cornell
and makes it more difficult for workers and retirement savers
who have been ripped off to get their day in Court. This is
wrong, Mr. Chairman.
We should instead strengthen and expand ERISA's fundamental
protections. We should ensure that workers and retirees are
empowered to stand up for themselves and their families if
denied the healthcare benefits they deserve. For example, I
previously introduced the Employee and Retiree Access to
Justice Act, which would ensure that individuals have
meaningful recourse when they are denied retirement and health
benefits, including mental health and substance use disorder
treatment under an employer-sponsored plan.
This is the kind of meaningful solution that workers,
retirement plan participants want from us, not policies that
make it more difficult for them to seek justice. Mr. Chairman,
I would be more than happy to work with you on your bill and my
bill, to see if we could avoid inefficiencies in American
workers getting the pension plans that they paid into and their
employers contributed to. Thank you, I yield back.
[The prepared statement of Ranking Member DeSaulnier
follows:]
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Chairman Allen. I thank the Ranking Member. Pursuant to
Committee Rule 8(c), all members who wish to insert written
statements into the record may do so by submitting them to the
Committee Clerk electronically in Microsoft Word format by 5
p.m., 14 days after this hearing.
Without objection, the hearing record will remain open for
14 days to allow such statements and other extraneous materials
noted during the hearing to be submitted for the official
hearing record.
I will now turn to the introduction of our four
distinguished witnesses. Our first witness is Mr. Andrew Salak-
Raham, a Principal at Groom Law Group here in Washington, DC.
Our second witness is Mrs. Lynn Dudley, the Senior Vice
President for Global Retirement and Compensation Policy at the
American Benefits Council in Washington, DC.
Our third witness is Mr. William Alvarado Rivera, a Senior
Vice President of Litigation at the AARP Foundation in
Washington, DC. Our last witness is Mr. Glenn Butash, the Chair
of the ERIC Legal Center for the ERISA industry Committee in
Washington, DC, and thank you again for being here today.
We thank our witnesses, and we look forward to your
testimony. Pursuant to Committee Rules, I would ask that each
of you limit your oral presentation to a 3-minute summary of
your written statement as Committee members have many questions
for you. The clock will countdown from 3 minutes. Pursuant to
Committee Rule 8(d) and Committee practice, however, you will
not be cutoff your testimony until you reach the 5-minute mark.
I would also like to remind the witnesses to be aware of
their responsibility to provide accurate information to the
Subcommittee. I now recognize Mr. Salak-Raham for your
testimony.
STATEMENT OF MR. ANDREW SALEK-RAHAM, PRINCIPAL, GROOM LAW
GROUP, WASHINGTON, D.C.
Mr. Salek-Raham. Good morning, Chairman Allen, Ranking
Member DeSaulnier, members of the Subcommittee on Health,
Employment, Labor and Pensions. My name is Andrew Salek-Raham.
I am the Principal at Groom Law Group, a law firm specializing
in all aspects of employee benefits. I am the practice group
leader for Groom's ERISA Litigation Group, where I have
represented ERISA litigants for over a decade.
In enacting ERISA, Congress sought to strike a balance
between protecting employee retirement benefits, and
incentivizing employers to offer them. The balance has grown
askew in the context of ERISA litigation, where an explosion of
meritless class action lawsuits has cost plan sponsors,
fiduciaries and service providers hundreds of millions of
dollars in defense costs and settlement payments, and enriched
the class action Plaintiff's bar at the expense of American
workers.
The low pleading bar is the main culprit. Before a lawsuit
can proceed to discovery in Federal Court the Plaintiff must
meet his or her pleading burden, that is plausibly alleged that
a Defendant committed wrongdoing. Unfortunately, Courts too
often hand ERISA class action Plaintiffs the keys to discovery
based on innocuous allegations.
For example, allegations that a 401-K plan paid a service
provider for necessary services, or that an employee stock
ownership plan purchased employer's stock from the company's
owner can be enough to State a statutory breach. Of course,
ERISA 401-K service provider engagements, and ESOP stock
purchase transactions are commonplace and in fact necessary to
the very existence of both types of plans.
Congress, in creating ERISA's careful imbalance did not
intend for retirement plan sponsors, retirement plan
fiduciaries and parties to ESOP transactions to spend years and
millions of dollars defending a lawsuit simply because they
established or administered a retirement plan.
Common sense legislation is therefore necessary to ensure
that ERISA Plaintiffs are required to plead something rather
than nothing. Without such a course correction, an
opportunistic Plaintiff's bar will continue to carry meritless
suits past the pleading stage, where asymmetric discovery
obligations require class action Defendants to spend millions
of dollars just to have the opportunity to argue the merits.
These astronomical costs push Defendants into cost of
defense settlements to buy peace regardless of the strength of
the Plaintiff's case. This is especially true for litigation
involving Plaintiff's firms that abuse the discovery process to
increase the baseline cost of defense and rachet up settlement
pressure.
Tactics include suing a large number of unnecessary
Defendants to financially stress the indemnitor sponsor company
suing the family members of alleged fiduciary Defendants,
including a recent instance, an infant, and issuing voluminous
and unduly burdensome written discovery.
The risk of tolerating costly, meritless lawsuits will lead
to less lucrative benefits or to no benefits at all for
American workers is not academic. For example, it has happened
in the ESOP space where certain Courts have long held that if a
Plaintiff alleges a statutory breach claiming that an ESOP did
what it was designed for, simply purchasing employer's stock.
Companies who wish to establish ESOPs regularly cite
litigation risk as a reason they have not done so, and those
that have established ESOPs bear skyrocketing fiduciary
insurance costs, costs that are ultimately borne by their
employee owners.
In acquiescing to a low pleading bar in its recent
Cunningham versus Cornell decision, the Supreme Court
acknowledged the, ``serious concern,'' that its holding would
contribute to an, ``avalanche of meritless litigation.''
Unfortunately, ERISA's text tied the Court's hands, and while
the Court identified tools available to lower Courts that could
help to eliminate meritless claims, the consensus is that these
judicial mechanisms have been and remain inadequate.
Legislation action is thus necessary to revise ERISA's
texts and help to restore an appropriate equilibrium between
allowing meritorious claims to proceed while filtering out
frivolous ones. Thank you, and I look forward to your
questions.
[The prepared statement of Mr. Salek-Raham follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Allen. I now recognize Mrs. Dudley for your
testimony.
STATEMENT OF MRS. LYNN DUDLEY, SENIOR VICE PRESIDENT, GLOBAL
RETIREMENT AND COMPENSATION POLICY, AMERICAN BENEFITS COUNCIL,
WASHINGTON, D.C.
Mrs. Dudley. Thank you, Mr. Chairman, and thank you Ranking
Member DeSaulnier, and members of the Subcommittee for being
here today, and allowing us to share our views from the
American Benefits Council. Right now the top retirement policy
issue for our plan sponsor members is a tidal wave of
inappropriate and yes, indeed, frivolous litigation.
That is draining resources away from benefits, inhibiting
innovation, preventing many new products and services from
being offered and benefiting only Plaintiff's lawyers. We
strongly support the Committee's attention to this crisis and
Representative Fine's Bill, which would override a Supreme
Court Decision in Cunningham versus Cornell University that
even the court admitted was not the right answer.
I would like to make three important points today in my
testimony. First, the tidal wave of litigation is hurting plan
participants. We conducted an informal survey of our plan
sponsors and found that almost 89 percent of defined
contribution plan sponsors report that the risk of litigation
is a very or somewhat significant factor affecting their
decisions to enhance services or provide different investment
options.
Second, only the Plaintiff's lawyers are benefiting from
the litigation. For example, from the period 2009 to 2016,
attorneys representing Plaintiffs in a breach of fiduciary duty
lawsuit, are estimated to have collected roughly 204 million
dollars for themselves, while securing an average per
participant award of $116, and it has gotten a lot worse since
2016.
Third, the Cornell case, which the Fine bill would
override, will make a terrible situation even worse. Under
Cornell, a Plaintiff can survive a motion to dismiss by simply
saying that a plan hired a service provider, which all plans
do. The next step in litigation is discovery, which can cost
Defendants around 10 million dollars.
The Plaintiffs offer to settle say for 6 million, the
Plaintiffs lawyers walk away with a third of that, 2 million,
and participants really get next to nothing, and all they have
done--all the Plaintiffs' attorneys have done is filed a
boilerplate complaint, and this can be repeated all over the
country with the exact same result, and that means the cost of
plans, and the availability of services and products in those
plans, and the outcomes reduced for participants all hurt
participants, including future participants.
The Fine Bill in our view is essential as a first step in
addressing the crisis. Thank you for your time, happy to answer
questions.
[The prepared statement of Mrs. Dudley follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Walberg [presiding]. Thank you, Mrs. Dudley. Now, Mr.
Rivera, we welcome you for your testimony.
STATEMENT OF MR. WILLIAM ALVARADO RIVERA, SENIOR VICE PRESIDENT
OF LITIGATION, AARP FOUNDATION, WASHINGTON, D.C.
Mr. Rivera. Good morning. Thank you, Mr. Chairman and
members of the Subcommittee. Thank you for inviting me to
testify today as Senior Vice President for Litigation at AARP
Foundation, I am honored to speak on behalf of AARP, which
advocates for the 125 million Americans age 50 and older.
Retirees depend on their retirement accounts in order to live,
and America is facing a retirement crisis.
Most adults worry about having enough money to be
financially secure in retirement, and Congress should focus on
ensuring their retirement savings are protected. The Supreme
Court's recent decision in Cunningham versus Cornell is much
more than a technical interpretation of ERISA.
It is a strong reminder of Congress's intent to protect the
retirement security of millions of hard-working Americans. We
have moved away from the old days of guaranteed pensions to
plans like 401-Ks, where folks are now expected to shoulder
more of the responsibility, and bear the risk for their own
retirement.
That is why ERISA exists, to make sure the people managing
these plans play by the rules. They are required to put workers
first, act with common sense, and handle your hard-earned
savings with prudence, loyalty and care. For everyday retirees,
these protections are not abstract. They mean the difference
between a dignified retirement and financial hardship.
When plan managers cut corners, like pushing high fee
investments, or ignoring costs, it can drain tens of thousands
of dollars from a worker's retirement savings over time. When
fiduciaries prioritize their own interests, the savers suffer
lower returns and face higher costs.
ERISA gives savers the power to fight back and ensure
accountability. The Supreme Court's unanimous decision--let me
repeat that, unanimous decision in Cunningham, reaffirms
ERISA's foundational promise, plan fiduciaries must act
prudently and loyally, and beneficiaries' only redress is often
meaningful access to the Courts to enforce those duties.
The Court made it clear, to State a claim under ERISA a
Plaintiff need only plausibly allege the elements of prohibited
transaction, just like any other case. The burden of proving
exemptions belongs to the Defendant, as Congress intended. This
restores the balance between everyday Americans and large
financial firms, ensuring that allegations of conflicted
transactions receive judicial scrutiny, rather than being
dismissed on technicalities.
Why does this matter? ERISA is not just a statute, it is a
promise. A promise that when workers put their hard-earned
money into retirement plans, those assets will be managed
prudently and loyally. If unnecessary procedural barriers
prevent claims from being heard, that promise is broken.
The significance of this decision cannot be overstated. For
most Americans the retirement savings represent their life's
work. Take one of our clients, Brian Burn, for example. Brian
was a retirement saver who alleges his plan fiduciaries
violated their obligations by carrying out prohibited
transactions. For Brian, a disabled veteran, the accumulated
losses could be life changing.
When companies mismanage retirement assets and seek to
maximize their own profit by charging people like Brian
exorbitant fees, they jeopardize the retirement security of
older adults, particularly harming low-and moderate-income
workers. There are millions of other Brians out there.
Some have claimed that the broad Cunningham decision will
invite a flood of so-called frivolous ERISA lawsuits, burdening
plans and fiduciaries. These concerns are overstated, and
ignore the data. Far from being frivolous, these cases often
uncover real harm leading to reforms like fee reductions and
improved investment menus.
That is not a decision to be taken lightly to bring a case
in the first place. The people who pursue these cases are doing
so to recover money that was siphoned away by those they
entrusted to look after it. It is money that is rightfully
theirs. Giving workers the right to fight back is not a threat
to retirement security, it is the very thing that protects it.
Congress should stand firm, and reject any attempt to pile
more burdens on America's working class, or weaken their
ability to enforce their rights. AARP urges the Subcommittee to
make sure participants can protect their hard-earned life
savings under ERISA, keeping fiduciaries honest and fostering a
more secure retirement system for all Americans.
Thank you for holding this hearing, and allowing me to
speak. I look forward to answering your questions.
[The prepared statement of Mr. Rivera follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Walberg. Thank you Mr. Rivera. Now I recognize Mr.
Butash for your testimony.
STATEMENT OF MR. GLENN BUTASH, CHAIR, ERIC LEGAL CENTER,
WASHINGTON, D.C.
Mr. Butash. Thank you, Chairman Walberg, Ranking Member
Scott, and Ranking Member DeSaulnier, and members of the
Subcommittee. Thank you for the opportunity to testify today.
My name is Glenn Butash, and I am the Chair of the ERIC Legal
Center, part of the ERISA Industry Committee, or ERIC.
ERIC is a national advocacy organization representing the
interests of some of the largest employee benefit plan sponsors
in the United States. The ERIC Legal Center advances policy
positions on behalf of its members in the Courts, primarily
through the filing of amicus curiae briefs in cases that raise
significant legal issues.
Over the past 15 years there has been a surge of cases
brought by a handful of class action law firms against benefit
plans and their fiduciaries. According to one recent study
since 2016, more than half of plans with more than a billion
dollars in assets have been targeted for litigation, some more
than once.
These are plans maintained by sponsors like ERIC's member
companies that devote significant resources and attention to
complying with the law. The barely veiled secret is that these
suits are designed to generate a quick settlement, often with
merely token recoveries for plan participants. If there is no
quick settlement and the case survives a motion to dismiss,
discovery and litigation costs can run into the millions of
dollars. This has real consequences.
In addition to the hard costs, litigation expense, and
increased liability insurance costs, there are soft costs as
well. The distraction of plan professionals, plan
administrators and plan investment teams who need now to gather
documents and respond to discovery in the lawsuit.
There has also the very real potential to distort fiduciary
decisionmaking, which would be an unintended result. All of
this is to the detriment of the retirement system that protects
so many American workers. ERIC strongly supports common sense
litigation to address this issue.
First, Congress should address the Supreme Court's decision
in Cunningham v. Cornell, and require in any case that alleges
that the engagement of a plan service provider constituted a
prohibited transaction, also to allege why the exemption that
Congress wrote for reasonable contracts or arrangements with
service providers does not apply.
Second, Congress should require in any case relating to
plan costs or plan investments, that the Plaintiff plead a
meaningful context specific benchmark, genuinely supporting an
inference that the plan fiduciary's process was flawed.
Third, discovery should be stayed while any motion to
dismiss is pending. Notably, none of these changes would
detract from the right of plan participants who are genuinely
aggrieved to have their day in Court. I welcome your questions,
thank you.
[The prepared statement of Mr. Butash follows:]
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Chairman Allen. Thank you sir. Now, under Committee Rule 9,
we will question witnesses under the 5-minute rule. I will
recognize myself for 5 minutes. Mr. Salek-Raham, we have heard
testimony today that predatory class action attorneys are
targeting large employee benefit plans and large employers for
quick dollar settlements.
In your experience, what percentage of the plan fiduciaries
that you have represented in litigation operated prior to
litigation with teams of experts to ensure they meet their
fiduciary duties?
Mr. Salek-Raham. Well, I am trying to think of an
exception, and I cannot, so I will say 100 percent, or very
nearly 100 percent.
Chairman Allen. Would you say that the plan fiduciaries
that are being sued are compliant with the law?
Mr. Salek-Raham. Absolutely, you know, ERISA, as the
Supreme Court has acknowledged, requires fiduciaries to make
difficult tradeoffs, and fiduciaries can make a wide range of
decisions that are reasonable. In the vast majority of
fiduciaries in my experience, are doing their very best
considering appropriate information, consulting with experts to
arrive at reasonable decisions that are in participants' best
interest.
Chairman Allen. Is it safe to say that it is not breaches
of the fiduciary duty that are attracting class action
lawsuits, but rather it is the pools of money in these plans
that attract class action lawsuits?
Mr. Salek-Raham. That is accurate. Plaintiff's typically
target the largest plans they can find with the most
participants in them. Those large plans bring with them a
potential for larger damages arguments from the Plaintiff's
side, and also often come with larger insurance policies. You
know, Plaintiffs are laser focused on insurance policies and
settlement discussions and mediations that really make no
secret that it is less about the merits, and more about how can
I compel you, you know, impose discovery costs that will compel
you to turn over your insurance policy as settlement.
Chairman Allen. When these settlements are reached, does it
benefit the 401-K employees and their plans? Does it benefit
the company who is providing funds, matching funds for those
plans, or do the lawyers get all the money?
Mr. Salek-Raham. The lawyers benefit for sure. They, you
know----
Chairman Allen. You are guilty until you prove you are
innocent, is that pretty much?
Mr. Salek-Raham. That is the result.
Chairman Allen. That is not juris prudence at all. That is
not how our country operates.
Mr. Salek-Raham. Correct.
Chairman Allen. Thank you. Mr. Butash, I understand that as
Chair of the ERIC Legal Center you have seen dozens, if not
hundreds of frivolous class action lawsuits filed against large
employers and large plan fiduciaries. What percentage of these
lawsuits were copycat or boilerplate allegations seeking a
quick settlement?
I cannot give you an exact percentage, but I do know that
in certain areas that has been the focus of these lawsuits.
When you read that a new complaint has been filed, and I will
go and I will read the complaint and it sounds very familiar,
and a lot of the allegations are not percentage specific, but
they present the arguments that you see in each of these cases,
they tend to be very cookie cutter lawsuits, very little
Defendant specific research.
Chairman Allen. Would you explain what you have seen with
respect to frivolous class action lawsuits? Can you give some
examples?
Mr. Butash. We are seeing there has been an enormous number
of cases relating to plan costs obviously, plan record keeping
costs, but also investment costs. There are also multiple, tons
of cases relating to the use of plan forfeitures in 401-K
plans, and the argument that there was a breach of fiduciary
duty in the use of those forfeitures even though the plan
document permits using them for such things as defraying
employer contributions.
Chairman Allen. Mrs. Dudley, you have 36 seconds. You look
like you need to add something to this discussion.
Mrs. Dudley. I do. Well, yes, the thing that I would--and I
say in the 43 years I have worked with plan sponsors I have
never seen litigation like it is today. It is exponentially
more. The number of cases that are what I refer to as frivolous
because they are just repetitive copycats, you will see a dozen
of essentially the same complaint filed spattered across the
country, or what might be forfeitures, or it might be fees, or
it might be under performance, or it might be any one of these
things, or it might date back to some transaction that occurred
in 1989.
I mean it is just across the board, and it is exponential
in impact on the plans.
Chairman Allen. Thank you. I now recognize Mr. DeSaulnier,
our Ranking Member, for the purpose of questioning the
witnesses.
Mr. DeSaulnier. Thank you Mr. Chairman. I think we are all
agreed since I am not an attorney, that we could--no offense to
any attorneys who are in a position of leadership on this
Committee, but we could use less attorneys and lawsuits. In
that regard this Committee, Subcommittee heard testimony from
the head of EBSA recently that they only had one investigator
for every 14,000 health plans.
It strikes me that we could actually do something
constructive by getting more investigators, so before we have
the lawsuit we could come to a conclusion and enforce the
existing laws, or where there are gaps. During Bush 2, we were
promised that these kind of investments and movements in
American's retirement plans to 401-K's would benefit everybody.
The facts that we have in front of us that is not what
was--has come to fruition. As a former small business employer,
this does not help the American workforce in terms of its
security. People under 40 do not have retirement accounts, and
their ability to move up and get wages and be able to
contribute has diminished in the last two decades.
Mr. Rivera, thank you for being here. Hardly a radical
organization, AARP, coming here and expressing its feelings.
Could you tell us just this decision, this unanimous decision,
how important it is for the financial stability of American
workers in retirements and enforcing it in a way that makes
these investments safer, not at higher risk.
Mr. Rivera. It is incredibly valuable to American workers
and savers. The resetting leveling of that playing field that
had previously been split off and against workers and retirees
is now restored, and again, it was nine to nothing, for a
Supreme Court that does not often agree, let alone unanimously
I think it is pretty clear, and they agreed not only that this
is what the law said, but also that it made sense given the
kinds of transactions that we are talking about here.
These are prohibited transactions, not questionable, not we
might want to think about this a little harder transactions,
these are prohibited transactions. Congress prohibited them for
a reason because they are generally not going to be good, but
they give the opportunity for the Defendants to be able to
demonstrate in those rare circumstances, that they might meet
an exception.
That is exactly the way it should play out because having
the burden placed on the retiree or the beneficiary does not
make any sense when it comes to these kinds of claims where you
are talking about somebody who has breached the trust that you
have placed in them to take care of your retirement, and the
information that might be relevant to any of those exceptions
to what are otherwise prohibited transactions, lie in the hands
of the other party.
Justice Sotomayor, on behalf of the entire Court, noted
that it made little sense to put that burden on the retiree.
Instead to have it as the Court decided with the burden
ultimately for proving those affirmative defenses on the
industry because what matters here is the risk that is borne by
the beneficiary, by having bad decisions made on its behalf.
The GAO has reported several times about how even a small
difference in fees may be--have a significant impact in the
long-term.
Mr. DeSaulnier. Mr. Rivera, we have numbers that middle
income Americans have on an average about $65,000 in retirement
savings. The lowest quarter of Americans have zero, so
Americans are working longer. We have had a 40 percent increase
in the last 10 years of people over 65 continuing to work full-
time. Could you address that? Your members are working longer
and harder because they cannot retire.
Mr. Rivera. That is a significant problem. There is a
retirement crisis in the United States. People are living
longer, which is generally good. People are working longer,
both by choice and by need, but to your point, the amount of
money that people have saved to be able to live when they
cannot or no longer are able or willing to work is simply isn't
enough for them to carry on.
She importance of preserving retirements through ERISA, and
the ability to use the tools that Congress created to protect
those savings are incredibly important for their financial
security, and to protect them from having to rely on public
assistance or other changes later.
Mr. DeSaulnier. Thank you, Mr. Rivera. Thank you to all the
witnesses again, and thank you Mr. Chairman. I yield back.
Chairman Allen. The gentleman yields, and I now call on our
esteemed Chairman, Mr. Walberg, for 5 minutes of questioning.
Mr. Walberg. Thank you, Mr. Chairman, and thanks to the
panel for being here. ERISA, I guess in comparison, ERISA like
Farm Credit has been an amazing, amazing factor for retirement,
and for planning for retirement, from for giving employees and
business owners an opportunity to combine and work together,
and offer choices.
I think it is a truth that alternative assets, or assets
that are private offerings, offer competitive returns and
opportunities for diversification for 401-K investors. That
being said, on August 7th President Trump issued an Executive
Order on democratizing access to alternative assets for 401-K
investors. The Order stated that and I quote, ``Burdensome
lawsuits that seek to challenge reasonable decisions by loyal,
regulated fiduciaries, have denied millions of Americans
opportunities to benefit from investment in alternative
assets.''
Mr. Salek-Raham, could you discuss whether burdensome
lawsuits are discouraging 401-K fiduciaries from innovations
such as alternative assets that could improve retirement
outcomes?
Mr. Salek-Raham. Fiduciaries operate in a challenging
complex environment. They're presented with ever changing facts
and circumstances that as you say require innovation and
creative solutions, so that participants obtain the benefits of
their retirement plans.
Fiduciaries who are seeking to innovate are threatened by
meritless, frivolous lawsuits in the same way that fiduciaries
who are engaging in the more mundane aspects of plan
administration are threatened. They are all threatened, and the
litigation is a powerful disincentive to fiduciaries to make
innovative choices, and come up with creative solutions
certainly.
Mr. Walberg. Okay. Mrs. Dudley, could you answer that same
question from your experience?
Mrs. Dudley. It is a great question, Mr. Chairman.
Recently----
Mr. Walberg. Microphone.
Mrs. Dudley. Oh, sorry. We recently conducted an informal
survey of our plan sponsor members, and almost 89 percent of
the defined contribution plan sponsors noted that the risk of
litigation is a significant factor in their decision to offer
services and investment options or products to their
participants.
It is the impact of, and the risk of litigation is
affecting plan sponsors in their decision and their ability to
offer a wider range of services and benefits to their
participants, and that hurts participants. That hurts
everybody.
Mr. Walberg. Not a risk of legitimate litigation.
Mrs. Dudley. This is not legitimate. If you have a
legitimate claim, nothing anybody is suggesting here would
affect that. If you have a process based violation that you
need to bring to the Court, overriding the Cornell decision
does not prevent you from taking that to Court.
Mr. Walberg. Okay. Mr. Butash, I detect that you would like
to answer the same question if you could, indeed, discuss
whether burdensome lawsuits are discouraging innovations?
Microphone.
Mr. Butash. Thank you. Mr. Chairman, I think the litigation
environment does discourage innovation. It tells fiduciaries
even though they know they are supposed to act in the best
interest of participants, and with the duty of prudence and
loyalty, it does tell them that in certain areas if I make this
particular decision there is the potential for a lawsuit, and
we would be naive to think that that doesn't color some of
their analysis.
I think the issue goes beyond the issue of alternatives,
which is a very common asset class, every DB plan owns
alternative growth assets in their portfolios. To me
personally, adding that to a 401-K fund should not be that
controversial, but it extends to many other areas as well, such
as the ability to offer lifetime income as a distribution
option in a defined contribution plan.
I mean that is difficult to do, and I think that the risk
of litigation is serving as a break on some of those
innovations, which would benefit retirees.
Mr. Walberg. Okay. Well, I appreciate the answers, and I
think we are, again, we want to foster that competition for the
good, and for the benefit. Litigation, though necessary at
times, certainly is in my mind, prohibitive, when it is abused.
Mr. Chairman, I yield back.
Chairman Allen. I thank the Chairman, and now I call on
Mrs. McBath, Representative McBath from the great State of
Georgia.
Mrs. McBath. Thank you Mr. Chair. Thank you so much each
and every one of you for joining us this morning, and I have
read your testimoneys. Although I do not have any formal
questions for you today, I would just want to caution that in
the climate that we are in financially, a lot of Americans are
very considered about every penny.
They want to make sure they are not losing any pennies.
They want to make sure that their investment for retirement is
funded, fully funded and protected, so I think that we need to
make sure that we are not erroneously saying that people are
deliberately filing frivolous claims, because oftentimes when
it is their life savings, it is critically important to them,
even though the fiduciary may not think so.
Instead of taking action to ensure that every American has
access to a plan that will provide a decent life for
themselves, and for their families in retirement, my House
Republican colleagues are pushing legislation that directly
undermines everyday American's ability to be able to defend
their legal rights in Court.
They are not undermining any--just any legal rights here
either, they are trying to chip away at the American people's
ability to protect what they fought a lifetime for, and what
they have earned and saved for themselves and for their
families. The efforts supported by my Republican colleagues
will only make it far more difficult for working families to
protect what little they may have saved over a lifetime of
being underpaid for the value that they create on a job.
They would tip the scales even further against the American
workers in favor of their employers by automatically giving the
benefit of the doubt to an employer over the employee, even
though the employee is the one who may have been wronged here.
Instead of allowing the legal system to play out and an
employee to have their day in Court to make their case, it
would make it more difficult and even impossible for workers to
get the justice that they are due. Justice that they have every
right to seek, and even a familial responsibility to pursue for
themselves, and for their families that are relying on them to
provide for them.
Instead of looking at these cases on their individual
merits, or evaluating them on a case-by-case basis, House
Republicans want these decisions to be made in favor of large
corporations before the legal system even has a chance to
begin. That is the real purpose of these efforts here today.
The real purpose is not to protect retirement benefits for
workers at all. House Republicans just claim that to be their
intent because the American people would never really knowingly
support something that takes their rights away, and hands them
over to the corporate giants who already have millions of
dollars and armies of well-trained lawyers at their disposal.
Instead of being straightforward about their intent, they
tell half truths about what is really going on in order to push
an agenda that is good for the wealthy and the powerful, but
bad for regular people. If Republicans wanted to support
Americans in retirement they would protect Medicare and social
security, not call them entitlements.
If they really wanted to protect Americans from having to
unexpectedly go back to work in their 70's and their 80's, they
would raise the minimum wage. They would stop cutting food aid
and scholarship dollars for the poorest American families so
that they can try to justify billions of dollars more in tax
breaks to the well-connected, and the most powerful in our
society.
Just like social security and Medicare. Americans pay for
their retirement in each and every one of their paychecks. They
earn it every single day at work, and it is dishonest to imply
otherwise. The proposals brought forth by the majority are
Republican tactics to try to trick the American people into
believing that the money that you earned and that you saved,
that money that you paid into the system is not really yours to
benefit from.
They are trying to convince you that they pay you to give
up your fund--excuse me, they are trying to convince you that
the pay you give up to fund your social security and your
retirement does not really belong to you at all. There is
nothing that you can expect to do about it if the money you put
away for your future is being mismanaged.
It is another attempt by House Republicans to break the
promises made to you by your government for generations. There
is so much that we could be doing to help Americans reach
retirement, instead of the proposals that the majority is
putting forward here today.
Simply, we need to stop playing games with the American
public, and the hard-earned money that they have put away. I
encourage all of us here to focus our efforts on solutions that
will truly make Americans lives easier and better going
forward. I yield.
Chairman Allen. I thank the gentlelady from Georgia, and
just for our witnesses. I just need to clarify the purpose as
we understand it is that the employees are not suing the
employers here. It is the law firms that are benefiting from
this process. That is what this hearing is about, so just to
clarify that, just a point of order there. I now call on Mr.
Onder for his line of questioning for 5 minutes.
Mr. Onder. Thank you, Mr. Chairman, and thank you for all
the witnesses coming here before the Subcommittee today. As a
physician, improving our Nation's healthcare system has been
one of my top priorities. A lot of this discussion today is
centered around employer sponsored defined contribution
pensions.
I would like to also learn more about how Congressman
Fine's ERISA litigation reform could impact health plans and
health plan litigation. I understand that the primary intent of
this bill is again, the former, mostly pertaining to record
keeping, or excessive investment management fees.
I am curious about how this would impact both frivolous and
legitimate lawsuits related to health benefits. For example,
some employees have sued over their employer's plans under the
ERISA statute for allegedly mismanaging their prescription drug
benefits, such as a Lewandowski v. Johnson and Johnson. That
class action lawsuit was dismissed due to the Plaintiff's
failure to adequately allege Article III standing.
Mr. Salek-Raham, in your experience are the majority of
Plaintiffs' lawsuits against health plan fiduciaries dismissed
for lack of standing?
Mr. Salek-Raham. Well, we have certainly started to see the
Plaintiff's bar bleed into the healthcare space, and you are
absolutely right. There have been several such lawsuits,
essentially copycat lawsuits trying to copy what has been done
in the retirement space, into the healthcare space.
You are correct, there have been dismissals based on
standing.
Mr. Onder. Generally over--OK, and are they usually filed
over fees, or over----
Mr. Salek-Raham. Yes. It can be related to fees. It can be
related to the benefits provided based on different plan
options, correct.
Mr. Onder. Okay. I am curious also about the interaction of
this bill with self-insured health coverage. Self-insurance, of
course, is a very popular alternative where the employer
provides--take actuarial risk, and provides health insurance to
his employees, often with re-insurance.
Earlier this year the Committee marked up my bill, the Self
Insurance Protection Act, which would preserve access to this
option that lowers health costs and improves quality for
employers and employees.
Mrs. Dudley, could you speak to whether Congressman Fine's
bill would affect the self-insurance, you know, health coverage
system in any way?
Mrs. Dudley. Well, the important thing about Representative
Fine's Bill is that it overrides the Supreme Court decision in
Cornell, and in that particular decision anyone who hires a
service provider, if a plan sponsor hires a service provider,
you are violating ERISA, and you survive the motion to dismiss.
All plans use service providers.
You have to use service providers. If you survive that
motion to dismiss, you are in the discovery, the period of
discovery. That is not--even a motion to dismiss can be upwards
of a million dollars to deal with a motion to dismiss. Then
discovery can be upwards of ten million dollars.
What it does, and it would affect all plan sponsors because
it puts pressure on companies to have settlements, and it
inhibits innovation and the ability to provide services to
people. It not preventing. It is not trying to stop legitimate
claims. It is addressing a problem.
Mr. Onder. Thank you. Mr. Butash, I would like to ask you a
couple of questions. You testified that there is been a trend
in increased frivolous lawsuits over defined benefit
contribution plans. Have you seen a similar trend in health
plans as well, self-insured health plans?
Mr. Butash. It is just beginning, and it is something that
we are watching at the ERIC Legal Center. We have been very
active as an amicus in filing cases trying to protect ERISA
preemption from State Court encroachment on uniform benefits
law, that is a big issue. I know it is not the topic for today,
but we are monitoring the healthcare cases to see what trends
might develop.
Mr. Onder. That was a point of my Self-Insurance Protection
Act as well, to prevent the states from encroaching upon
reinsurance, which is essential for most employers to provide
employer provided coverages.
Mr. Butash. Yes.
Mr. Onder. Thank you very much. I yield back.
Chairman Allen. I thank the gentleman for yielding. Now, I
call on Mrs. Mannion from New York.
Mr. Mannion. Thank you, Mr. Chair.
Chairman Allen. Representative Mannion, I am sorry.
Mr. Mannion. Thank you. Thank you, Mr. Chair, thank you to
our witnesses. I am glad to be here today to talk about the
financial security of American workers, and ensuring that
employee benefits, including health and retirement benefits are
fully protected.
When ERISA was signed into law over 50 years ago, Congress
made an essential commitment to safeguard workers' hard-earned
benefits, and to ensure plan managers and fiduciaries operate
by the highest standards.
Over the years Congress has worked to strengthen ERISA's
provisions and protect the interests of plan participants and
beneficiaries. Just this year the Supreme Court in a unanimous
decision reaffirmed workers' rights to have their day in Court
and recover what they have been owed when their retirement plan
is mismanaged.
Despite it being a unanimous decision, some members of the
House and this Committee have taken issue with it. We have
heard a lot of attacks from the other side that class action
lawsuits brought by employees are frivolous. Here today some
have suggested that the ERISA legislation does not benefit plan
participants at all, but rather their attorneys.
I was a teacher association President representing
professionals, teachers, nurses, school psychologists, almost
400 of them over the course of 8 years. In my experience with
them, when individuals were impacted they were simply trying to
protect their livelihoods and hold fiduciaries accountable.
Mr. Rivera, you have heard these same claims here today and
before that the ones that are benefiting most from ERISA
litigation are the Plaintiff's attorneys, and is in support of
this view, what has been cited that they believe that the
settlements are often small for what is recovered for plan
participants.
Given your experience in supporting workers who have been
harmed, could you respond to the claims that we have heard
today, and talk about some of the victims in the cases that you
have worked with?
Mr. Rivera. Sure. There is no question that strong
enforcement of ERISA has led to better outcomes for plan
participants and savers. This is true not only because of the
important watchdog function that ERISA allows the beneficiaries
to play on behalf of themselves, and the plan itself, right?
This is a feature, not a bug, to have private enforcement
to ensure fiduciary duties are kept. Importantly, in addition
to the funds that are recovered for the individuals, which of
course when you total them in any given case, are going to be
the vast majority of dollars recovered, so it is a little
disingenuous to talk about the total recovery for one, the
attorneys, versus an individual when you have to multiply that
by 300,000, or however many hundreds of thousands of people
were harmed by the practices at issue in that case.
More importantly, what we see is behavioral change as a
result of those cases. It is not just about the money. It is
about the practices. It is about competing so that the fees
that you charge are lower. As a result of litigation over the
history of ERISA, the fees are lower for plan administration
and investment. There are better practices with respect to due
diligence.
There is greater competition, so that the ultimate
beneficiaries here are the plan and the plan beneficiaries.
Mr. Mannion. Thank you, Mr. Rivera. I yield back.
Chairman Allen. I thank the gentleman for yielding. Now I
call on Representative Mackenzie for your 5 minutes of
questioning.
Mr. Mackenzie. Thank you, Mr. Chairman, and I appreciate
the topic of today's hearing. Very important that we do focus
on the benefits that American workers have earned and they
deserve, and making sure that fees are not excessive, that
lawsuits are not frivolous, and that ultimately that money
makes its way back to those American workers, so that they can
enjoy their retirement.
Just a couple quick questions that I have for the
panelists. The first is for Mr. Butash. I understand from your
bio that you have practiced ERISA law for almost 40 years. Have
you seen this being a trend of frivolous class action lawsuits
over your career, and during the last decade?
Is that a trend line that you are seeing an increase of
these?
Mr. Butash. I think there has been. I am trying to think
back to earlier in my career, the types of ERISA litigation
cases that I saw and read about, and they seem there were
different focuses at different times, but there did not seem to
be this deluge of cases.
Again, I comment that they seem to be largely brought by,
you know, a handful of the same law firms, so they are
recycling the same pleading against deep pocketed Defendants,
or large plans in the views of getting a quick settlement. If I
may, Ranking Member DeSaulnier mentioned the number of
investigators at the DOL compared to the number of benefit
plans.
It is important to remember litigation is not an
investigation tool. You are supposed to have a claim before you
file your complaint. I think one of the key problems with the
pleading standard in general, and with the Cornell decision in
particular, is that what the Supreme Court said in that case is
when a plan is engaging a service provider, which all benefit
plans do, I think it almost would be imprudent not to engage a
professional record keeper, a professional asset manager.
What the Supreme Court said is that if you want to allege
that that is a prohibited transaction, all you have to allege
is that the fiduciary hired a service provider to provide
services to the plan, and instead the burden then shifts to the
Defendant to prove that it meets the exemption for reasonable
contracts or arrangements with service providers.
I appreciate that that was a 9-0 decision, and I am not
quarreling with the legal analysis of that decision, but the
result is I do not know what adjective to describe, and it
would not be novel for Congress to step in after a Supreme
Court decision, and to return expectations to where they were.
There was a case back in the early 90's called Harris Trust
that unsettled all expectations in the particular issue that
was at issue in Harris Trust. A few years later Congress passed
legislation to address the Harris Trust decision. We really
commend Representative Fine's Bill for addressing the Cornell
decision in a way that we think is very responsible, and really
does not detract from aggrieved participants to bring claim
where there is genuine harm that they are aware of.
Mr. Mackenzie. Time is running down, so I will go to Mrs.
Dudley here. Regarding President Trump's Executive Order on
August 7th, about litigation risks that impede America workers'
retirement accounts from achieving competitive returns and the
asset diversification necessary to secure a dignified
retirement.
What are examples that you see of threats from these
lawsuits that are being brought by a small number of law firms
as was just stated, against these Defendants. What do you see
that the result is on stifling innovation or making changes for
employee benefit plans that actually do not benefit the
employees?
Mrs. Dudley. Absolutely. Great question. Again, we
conducted an informal survey, risk of litigation is a key, a
significant factor in their decision to offer new services, or
benefits. Almost 89 percent said that, of defined contribution
plan sponsors. Almost 29 percent of our plan sponsors that
answered the survey State they will not do something, they will
not offer something new unless other people are doing it.
Almost 25 percent say they will not offer, they have
decided not to offer more assistance because of the risk of
litigation, and almost 43 percent say they will not provide
lifetime income because of the risk of litigation. I mean it is
very serious.
Mr. Mackenzie. Those are serious findings. I appreciate you
bringing them to us. Obviously, again we want to make sure that
there is the appropriate amount of flexibility and innovation
in the market for these employee benefit plans because again,
as the markets change, we need to adapt to make sure that
workers have the benefits in their retirement that they not
only deserve, but they have earned over the years.
I want to thank all of you again, and I yield back to the
Chair.
Chairman Allen. I thank the gentleman for yielding. Now, I
call on Mrs. Hayes from Connecticut for your line of
questioning for 5 minutes.
Mrs. Hayes. Thank you. This hearing reflects a pattern by
the Trump administration and Republicans to attack the
regulatory and legal frameworks that protect the retirement
benefits of workers. In America, you should be able to retire
with dignity if you work hard and play by the rules.
Preparing for retirement is incredibly important, and often
requires assistance from financial professionals. In April
2024, the Biden administration finalized a Retirement Security
Rule that would protect American workers and retirees by
requiring financial advisors to act in the best interest of
their clients.
This rule would have addressed a deceitful practice in
which a financial advisor could steer clients toward
investments that were more lucrative for the advisor, but not
in the best interest of the clients. While most financial
advisors are working in the best interests of their clients,
this problem costs retirement plan participants as much as 17
billion dollars a year.
Unfortunately, the Trump administration and Republicans are
working to rescind the Retirement Security Rule. Last week the
Department of Labor withdrew its appeal defending the rule in
Court, paving the way for the administration to abandon the
rule altogether.
Mr. Rivera, can you explain how the actions by the
Department of Labor to rescind the Retirement Security Rule
would impact workers and retirees?
Mr. Rivera. Well, the Retirement Security Rule is something
that AARP certainly had supported, and I think the importance
of fiduciary duties cannot be overstated to protecting American
retirees. Just as we are discussing here today, the American
worker is really counting on other people to help them navigate
their retirement.
They are bearing the risk of choosing how their money is
saved and invested. It is important for us to make sure that
they have all of the tools and all of the protections
necessary, given that we are operating in a system where
individuals are taking on greater risk and greater
responsibility for their own retirement.
Mrs. Hayes. Thank you. In your testimony you also stated
that, ``Congress should not tinker with what the Supreme Court
unanimously decided in Cunningham versus Cornell, which ensures
that allegations of conflicted transactions receive judicial
scrutiny, rather than being dismissed on technicalities that
deny workers their day in Court.''
Can you tell us why any legislative attempt to overturn or
narrow the holding announced in that case would directly
undermine the core protections of ERISA, and impose greater
harm and risk to retirement beneficiaries? What are some
actions that Congress could take to ensure that the workers
retire with their dignity and the benefits that they have
earned?
Mr. Rivera. Well, there is certainly a lot of room for
improvement for the retirement savings of American people to be
protected, and to grow. The standard here that the Supreme
Court announced is really important for American workers
because it does make sure that as we said earlier, these
transactions are per se, problematic.
Those are the words that the unanimous Court used in its
opinion. These particular transactions present so much risk of
harm to the individual savers that you generally cannot do
them. There may be certain exceptions under certain
circumstances, based largely on information that may be solely
in the possession of the fiduciaries.
Nevertheless, it is important to make sure that the retiree
savings are as strongly protected as possible.
Mrs. Hayes. I think you said something very important, the
individuals. For any people it takes a lot of trust to hand
over your retirement savings to someone, and you just operate
with the assumption that they are working in good faith, and in
your best interests.
I think on this Committee we should be focused on
protecting the American workers and retirees, ensuring that
there is both transparency and accountability in the way these
plans play out because for the average person they would not
have all of this fiduciary knowledge to understand the impact,
the long-term impact of all of these things.
We actually have the ability on this Committee to focus on
protecting the retirees who literally have saved this money to
secure a thriving retirement. With that I yield back.
Chairman Allen. I thank the gentlelady for yielding, and
now I recognize Representative Fine, who we have talked about
quite a bit this morning, for your 5 minutes of questioning.
Mr. Fine. Well, thank you, Mr. Chairman, and hopefully some
of it is a little good. It would be a nice change. I want to
thank you all for having the hearing today on an issue that I
think is very important to people's lives and featuring this
issue, and talking about my bill, House Bill 6084.
We have all experienced this issue in our own lives. Leave
ERISA out of it. Think about going through your mail on the
average Saturday, and you find some notice about some lawsuit
that is happening. You did not even know about. You did not
know there was an issue. You get a check for $7.23, and if you
actually read the notice you find out that the law firm that
brought this claim is going to get 5, 10, 15 million dollars
for getting you your $7.23.
Well, it is one thing when that happens in some sort of
generic part of your life, but it is another when it happens
when it comes to your retirement that you were depending on to
take care of you when your working years are over, and that is
why this bill is so important.
Let me be clear. No industry has a monopoly on jerks, and I
actually usually use another word when I saw that. There are
bad actors that need to be sued, but there are also plenty of
bad lawyers who take advantage of the system. What my bill
intends to do is to strike that balance to give people the
opportunity to sue when that bad actor does take place, but
also to protect people from having their retirement savings
sucked away from unscrupulous lawyers.
I do have a few questions. I want to start with Mr. Butash.
In your testimony, you gave an example sort of like the one I
talked about where participants got under $20 each. That is not
going to save your retirement, while lawyers took nearly a half
a million dollars in fees.
It gives that lawyer a pretty good retirement. Is that the
purpose of ERISA, to help lawyers retire with half a million
dollar feels while people get 20 bucks? Is that an outlier, or
typical of how these cases resolve?
Mr. Butash. That is the not the purpose of ERISA. I think
class action lawyers in cases that are not designed just to
yield a quick settlement, you know, are looking to be
compensated for their efforts.
Typically, we do see, and I do not know why the industry is
stuck on this, but they typically take a third of the recovery.
Imagine if you will, and you know, the cases are legion every
week or so, you can read about a settlement, and it is a recent
case, and it is settling at, you know, 2 or 3, or 4 million
dollars. That lawyer is going to take a third of that, and then
the rest of it is going to be divided among the 50 or 75,000
participants in that plan.
Recall too that these are fiduciary cases. The statute of
limitations under ERISA is 6 years, so they are getting $50,
but that is to cover the alleged wrong covering 6 years, so it
really is like the example that you gave where you get your $7
check in the mail.
Mr. Fine. Keep in mind the reason it is a third is there is
no one really to negotiate. In most of these instances the law
firm is coming up with the case. They are finding a couple
people who are willing to be the primary Plaintiffs, but it is
not as though some guy who is in the ERISA plan is hunting for
a law firm to get him the 20 bucks.
That is why the fees never go down. Mrs. Dudley, you
mentioned a tidal wave of frivolous litigation draining
resources from workers' retirement accounts. In your view, how
urgently is congressional action needed, and what risks do
workers face if Congress fails to pass my bill, which is again,
the ERISA Litigation Reform, H.R. 6084?
Mrs. Dudley. To me, I think it is extremely urgent.
Mr. Fine. That is the right answer.
Mrs. Dudley. I think this is really important, and I am so
appreciative of the hearing and opportunity to talk with
everyone about this. Under the current law, based on the
Supreme Court decision, the Plaintiffs' attorneys can go out
and gather up their Plaintiffs, file their claims and file a
whole lot of them at once, and compel settlements very quickly
because of the cost.
Even just the motion to dismiss is expensive, and then you
get to discovery, and that is extremely expensive. What this
does is it makes plan sponsors have to pull back and limit what
they can do, and then it scares participants, and then they do
not contribute, and they do not engage in the plan. Overall, it
is very urgent.
Mr. Fine. I would close just by noting the cost of this is
not just the money that is going to the Plaintiff's attorney.
We can focus on the $500,000, but the defense costs that the
plan has to pay, which could be a million, two or three, that
never shows up anywhere, so it is a third of the settlement
goes to the Plaintiff's attorney, it could be an equal amount
that the company spent fighting it until they decided it just
was not worth it to settle.
This is hurting our retirees. We owe it to them to protect
them. I appreciate the hearing, and I hope we will get my bill
moving. Thank you for being here. I yield back.
Chairman Allen. I thank the gentleman from yielding, and I
call on my good friend Mr. Courtney for your line of
questioning.
Mr. Courtney. Thank you, Mr. Chairman. Again, as somebody
who practiced law for 27 years before I came to Congress, I was
actually quite sort of curious about this hearing because I
actually had not been following this case, but seeing unanimous
decision by the Supreme Court, and also a very interesting
discussion of the Federal Rules of Civil Procedure, Section 7
in the both concurring opinion and the prevailing opinion, I am
really struggling honestly.
Mrs. Dudley, I have worked with the Benefits Council a
number of years, have a lot of, you know, respect and
admiration for the work that, you know, that they do. I
honestly feel that the reaction to this decision is way over
the top. I am not the only one.
Jones Day, which is a highly respected law firm here in
Washington, DC. does a lot of defense work for companies in
this type of litigation. They published an article after the
Court decided its case in which it said that the U.S. Supreme
Court encourages Federal Rule 7a7 replies, which is a way to
screen out meritless complaints before discovery.
Again, I want to be really clear here because it was both
the majority opinion and the concurring opinion by Alito that
laid out the roadmap for defense counsel in terms of getting
swiftly to a judgment on a meritless claim. Again, in
accordance with the ruling that was handed down.
You know, Mr. Rivera, may I just want to make sure, you
know, I am not reading Jones Day's analysis wrong. I mean the
fact of the matter is that again, they gave a very clear,
somewhat not used much in the past because they did not have to
use it, okay?
What the Court is really saying to defense counsel is that,
you know, you have to kind of hustle a little bit, you know, in
terms of the pleadings pre-discovery to get to the place where
a motion for judgment can actually be heard. Mr. Rivera, maybe
you can respond to that opinion of the Court's decision?
Mr. Rivera. Sure. I think the Court, both in the unanimous
decision, as well as in the concurrence offer a number of
different ways the concurrence highlights Rule 7 as you said,
to reply to an answer. The Court said there are other tools in
addition to Rule 7, and that Rule 7 hasn't been commonly used.
It does not mean it is not viable to your point, has not
needed to be used, or people really have not thought about it
very much. Use it. Let us see what happens with that on both
sides, and see how that process plays out. The court
acknowledged you have the opportunity to have a reply, make
sure there is a standing question, if there is a question of
the party's standing to sue.
There's sanctions for bad faith cases, truly frivolous
cases. There are real remedies, and disincentives to bring a
truly frivolous case, as opposed to one where people may
reasonably differ. As a lawyer you would know not every case is
going to be everybody agrees oh, this is clearly right, this is
clearly wrong.
There are going to be places for that kind of case
management that enables frivolous suits to be
[unclear].
Mr. Courtney. Well, thank you for again, just sort of
reminding us that the Court did not sort throw the doors open
to Lionel Hutz from the Simpsons to come rushing into Court,
and trying, you know, to get judgments, you know, that are
undeserved.
The fact of the matter is they left--they laid out a
responsible, legal process for a swift judgment on meritless
claims. Mr. Chairman, I would ask that again, the Jones Day
analysis of this decision, which again describes it as a
potential boon for defense counsel in terms of getting the
desired result, which we have heard--we have been listening to
in this hearing this morning.
Chairman Allen. Without objection.
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Mr. Courtney. You know, again, if we override this, and
again, believe me, there is a lot of Supreme Court cases I
would love for us to be holding hearings on in terms of having
Congress, you know, take action. Citizens United, obviously
right there at the top of the list, which the damage is done to
our elections and political process.
The fact is that we have got a case that is literally--the
ink is barely dry on this decision, and it was last spring that
it was handed down. There clearly is disagreement, legal
disagreement, about whether or not the witness's position today
is going to create this crisis, or whether or not it is
actually going to actually help the system weed out meritless
claims.
I think again, we are rushing ahead with a legislation on
an issue that is far from a crisis. I yield back.
Chairman Allen. I thank the gentleman for yielding. Now, I
call on our esteemed Chairman Emeritus of this great Committee,
Mrs. Foxx from North Carolina for her 5 minutes of questioning.
Mrs. Foxx. Thank you Mr. Chairman, and I appreciate this,
and I appreciate your holding this important hearing. Mr.
Salek-Raham in your testimony you give examples that border on
outright harassment, including Plaintiff's counsel suing a
Defendant's infant grandchild, and serving process on the
baby's home.
What is this willingness to target anyone even loosely
connected to a plan up to and including minors? Tell us about
how unrestrained and unprincipled some of these litigation
strategies have become? What message does that send to
employers who are trying to provide voluntary benefits in good
faith?
Mr. Salek-Raham. Certainly, it is an example of the non-
monetary burdens that Defendants in these cases who are people,
individuals, face, and so that was one of the more egregious
examples, but certainly there are any number of examples of
discovery abuses, including you know, naming as many Defendants
as possible to increase the financial burdens on plan sponsors
to ratchet it up settlement pressure, as well as just, you
know, the volumes and volumes of discovery that can be issued
that can rachet up legal fees.
It is a real burden, and it is done intentionally by the
Plaintiffs bar again to extract those costs of defense
settlements.
Mrs. Foxx. Well, I am going to followup a little bit on
that. As you know ERISA is a protective statute that Congress
passed to protect the benefits of American workers and their
families. Could you discuss whether the litigation reforms
discussed today, such as stays on discovery, or modifications
to pleading standards would undermine those protections?
Mr. Salak-Raham. No, they would not undermine those
protections. In fact, I think they would enhance them. The
concern is that meritless, frivolous lawsuits, if allowed to
continue, and it is not just starting with Cunningham. This has
been years of them. If allowed to continue will impact plan
sponsor and fiduciary behaviors. Plan sponsors could decide
that it is not worth it to offer benefits anymore, or they may
offer less lucrative benefits, given the costs of defending
these lawsuits.
Or they may change their behavior. They may think I would
like to engage a particular service provider who I think would
be best suited for my particular plan, but they are not the
absolute cheapest, and that makes me nervous that I might get
sued. Maybe, you know, there is an incentive to make a
fiduciary choice that the fiduciary does not believe is
actually in its participant's best interests.
I think that by eliminating these frivolous lawsuits you
are actually enhancing protections for American workers.
Mrs. Foxx. Thank you. Again, I want to get some
amplification on what you just said from Mr. Butash. You State
in your testimony in today's environment fiduciaries might
avoid choosing providers or funds that offer richer services,
or better long-term value simply because they fear becoming
litigation targets, as Mr. Salek-Raham just said.
Can you explain how this threat of becoming the target of
litigation for choosing anything, but the cheapest possible
option undermines the quality of retirement plans, and the
outcomes workers rely on?
Mr. Butash. ERISA can, I believe, and does recognize that
when a fiduciary is making the decision, there are a range of
reasonable options, a range of reasonable decisions that that
fiduciary can make. Unfortunately, with the pleading standard
the way it is, despite efforts with Supreme Court cases, the
Dudenhoeffer case, the Northwestern case.
We are still getting these cases where the pleading
standard is exceedingly low, and that is causing this added
cost that is disruptive to retirement plans in the United
States.
Mrs. Foxx. Thank you very much. Mrs. Dudley, predatory
lawsuits contain baseless accusations. How do these accusations
undermine employee confidence in the benefits provided by an
employer?
Mrs. Dudley. They do undermine that, and that is a good
question too. They do undermine the confidence of the employee
because they erode trust. A lot of things, these settlements,
and that is really what is happening here with the frivolous
lawsuits, is that they are trying to drive to a settlement.
Settlements maybe look like somebody did something wrong,
even if what the company was trying to do was settle it so that
it did not continue to drain resources. Remember, those
resources are not just the time and the commitment from the
H.R. and the benefit staff, but it is also paid for out of the
budget, and reduces the future compensation and money available
for benefits.
It looks like somebody did something wrong when in fact
they did not. They were just trying to be practical, and it
causes employees not to engage in the plan.
Mrs. Foxx. Thank you very much. Thank you Mr. Chairman
again. I appreciated our witnesses. I yield back.
Chairman Allen. The gentlelady yields. I know call on Ms.
Lee from Pennsylvania for your line of questioning for 5
minutes.
Ms. Lee. Thank you, Mr. Chair. My Republican colleagues on
this Committee have held hearing after hearing, and introduced
bill after bill, benefiting employers and their profits at the
direct expense of workers' rights, and workers' ability to meet
their basic needs.
Here we are again with a hearing, another hearing about how
to further undermine workers by limiting their ability to make
claim to the retirement benefits that they are legally entitled
to. Our Republican colleagues have referred to workers' ERISA
lawsuits as frivolous.
With an administration that has shown complete disregard
for worker protections, from undercutting the Employee Benefits
Security Administration, to trying to eliminate the Consumer
Financial Protection Bureau, altogether, how can we call
workers who are using what little resources and recourse they
have left to address valid complaints about excessive fees or
questionable pension investments frivolous?
With an administration that issued an Executive Order to
facilitate 401-K investments and private equity, and crypto
currency, it is hard to believe that workers might be facing
real issues with their retirement funds caught up in risky
investment options. I do not think it is. It is the very people
waging the attacks on workers who are alleging that workers are
complaining too much about being attacked.
They would have us believe that it's the volume of the
complaints that we need to address, not the fundamental attacks
that they are facing, despite the fact that the volume is not
even high, with about 100 class action lawsuits a year for over
800,000 ERISA covered retirement plans, workers concerns are
very real, yet the significant harms to workers posed by high
fees, by fiduciary breaches, are completely absent from
Republican talking points.
Instead the focus is solely on the alleged harm being done
to big corporations, the health insurance companies and
corporate defense attorneys. Mr. Rivera, in your experience
with ERISA lawsuits, are the corporations being sued suffering
more than the workers and senior citizens who are suing them?
Mr. Rivera. No. Clearly, we are talking about the brunt of
the challenges here falling upon beneficiaries and retirees.
They bring the cases because they have obviously a deep stake
in their financial future. This is about the people at the end
of the day. They need the lawyers to access the system because
that is the tool that they have that Congress has created to
ensure that fiduciary duties are enforced and honored, and as a
way to get behavior change when organizations do the wrong
thing.
Ms. Lee. Yes. When a class action lawsuit has been
successful, what has it meant for the workers and the senior
citizens who are part of the suits?
Mr. Rivera. Lower fees, better investment choices among
other things, being able to reduce the cost of different kinds
of investment, greater practices internally with respect to due
diligence to competitive bidding for the services that they
need. All of the things that have helped to make the process
better and safer for retirees and savers.
Ms. Lee. Thank you. The real story here is that when
workers and senior citizens experience very real harm to their
retirement savings, the ability to exercise their legal rights
can be the difference between retirement security or financial
ruin.
Instead of focusing on how to protect workers and senior
citizens rights, especially from an administration working to
undermine them, we have Republicans and our allies in business
pushing to overturn a unanimous Supreme Court decision to make
it even harder for the workers to exercise their legal rights
under ERISA.
Mr. Rivera, should the folks who AARP represents, the 100
million Americans who are at least 50 years old, feel secure
about their retirement prospects with the direction that the
administration and the Republicans are taking us in?
Mr. Rivera. Well it is very clear that the people who have
retirement savings, workers, future beneficiaries, retirees,
need to have every tool available to them, including access to
the Courts, to be able to make sure that their hard-earned
savings are well protected, and that they can have as much
trust in their fiduciaries as possible.
Ms. Lee. Maybe? I appreciate that, and I appreciate your
testimony. Republicans already passed the largest cuts to SNAP
and to Medicaid in history, and now it is clear that they want
to go after folks' retirement benefits too, and that is a deep
concern. We all have a senior citizens in our lives, and 1 day
we too will be retiring.
We want to know that we can do that with dignity, and we
can do it without financial ruin. Americans work a lifetime to
earn the right to retire with that, and we must do everything
in our power to protect it, so I thank you all such much and I
yield back.
Chairman Allen. I thank the gentlelady for yielding. Now I
call on my friend, the Ranking Member of this Committee,
Representative Scott for his 5 minutes of questioning.
Mr. Scott. Thank you, Mr. Chairman, and I yield 30 seconds
to the gentlelady from Georgia.
Mrs. McBath. Thank you to my colleague from Virginia. I
would like to respectfully respond to comments that were made
by Chairman Allen earlier that the employees are not suing, and
that the lawyers are just benefiting on their own. The lawyers
are clearly suing on a Plaintiff's behalf, so I wanted to
clarify that I believe that this was just a difference of
opinion between us on this issue that does not rise to a point
of order.
I believe my comments were accurate to what we are
discussing today, and I want to make that clear before we
conclude today, and I yield back to the gentleman from
Virginia.
Mr. Scott. I am reclaiming my time. Mrs. Dudley mentioned
that 89 percent consider being--of the participants, consider
being sued as they make their decisions. Apparently, it is
worked because according to the statistics that the Ranking
Member cited, 99 percent--99.9 percent of the plans, in fact,
did not get sued between 2020 and 2024.
This hearing is about the 1 out of 1,000 that I guess did
get sued. Mr. Rivera, we heard a lot about these copycat
lawsuits. I remember when I was practicing law if I filed a
divorce suit, each one looked remarkably like the last one I
filed on exactly the same grounds.
Should we be surprised that a case based on excessive fees
should look much different than the last case based on
excessive fees?
Mr. Rivera. I would expect that there would be similarities
in a lot of those kinds of cases if there are similar
allegations in terms of the particular provisions of ERISA that
one is challenging.
Mr. Scott. Thank you. In Cunningham v. Cornell, that found
the claim of exemption was an affirmative defense, is there
anything in the Federal Rules of Civil Procedure regarding
affirmative defenses that is peculiar to ERISA cases, it would
not apply to just about every other case?
Mr. Rivera. Nope.
Mr. Scott. We have heard about lawyers getting paid. In
fact, we heard from the gentleman from Florida that
participants got 20 bucks, and the lawyers got half a million.
It raises a question well. You can rip your participants off
clearly up to $20 to avoid the lawyer getting paid. There must
be some threshold where you can get ripped off.
Obviously, the only way you can stop the misconduct is
these lawsuits. I guess my question is should the plan pay the
legal fees, or the guilty fiduciaries who have been profiting
from their misdeeds pay the legal fees?
Mr. Rivera. It certainly sounds like it should be the ones
who did something wrong.
Mr. Scott. Okay. Well, Mr. Butash and Mrs. Dudley, can you
name specific examples of lawsuits that were in fact frivolous
that were brought against some of your member organizations?
Mrs. Dudley. Well, I do not think today I would name names,
and name the specific lawsuits. I do know that there have been
just a whole range of copycat lawsuits, and I will be happy to
come back to you with more specifics on these, but----
Mr. Scott. Okay. If you are talking to Mr. Butash, can you
come up with examples of cases that are frivolous? Maybe even
some against your members that were meritorious?
Mr. Butash. I do not have that information for you. I will
say though ERISA reflects a careful balancing, and participants
do need the right to get the benefits that are promised to
them. We should not have a system that is so complex or so
costly that it discourages employers from creating and
maintaining employee benefit plans in the first place. It is a
voluntary system.
Mr. Scott. Well, thank you. Mr. Rivera, can you cite
examples of meritorious cases that have been brought that have
stopped abuse?
Mr. Rivera. There are a lot of cases that have settled,
right, and most of those cases--well, all of those cases, no
one admits any wrongdoing. You have seen as a result of cases,
changes to plan behavior that over time as you look at the
industry have definitely led to reduced fees, greater
transparency, and better choices for the plan beneficiaries.
Mrs. Dudley. Excuse me, if I could just add and finish my
sentence. There is a good example out of the Second Circuit
where the Court had to revive a case based on the Cornell
decision, even though they had dismissed it as baseless. It is
happening. There are lots of suits that I would deem frivolous,
or I would deem baseless, or Courts have decided are baseless
that now will be reopened just because of the Cornell decision.
Mr. Scott. Thank you Mr. Chairman. I yield back.
Chairman Allen. All right. The gentleman yields back. All
right. Okay. All right. It looks like we are finished up here,
and I will call on the Ranking Member, my friend, Mr.
DeSaulnier, for your closing statement.
Mr. DeSaulnier. Thank you Mr. Chairman, and again, as we
often talk in our relationship here, I am more than happy to
engage in a discussion about making the system more efficient,
and making sure that Americans' retirements are protected.
In 1989, if my number is right here, just a second. In
1989, almost half of Americans were in a defined benefit plan.
As we have moved away from that to more creative solutions, we
have more pressure. That is why people are working longer, and
there is more pressure on people, in addition to the fact that
the cost of things continue to go up.
It squeezes harder and harder. I am happy to work with you
as two people who have met in our other careers thousands of
payrolls and contributions to make the system more efficient.
Americans, workers, and retirees are facing a crisis thanks to
the current, in my perspective, administration's economic
policies.
The cost of living is as I have said, continues to rise.
The job market has slowed. Financial markets are suffering, and
worker protections have been stripped away. Today's hearing and
the Subcommittee's agenda, this year, have regrettably, in my
opinion, focused on chipping away bedrock regulatory and legal
frameworks protecting workers retirement and healthcare
benefits.
Earlier this year the Committee advanced two partisan bills
that tipped the scales against workers in favor of bad actors,
not all employers, but the most egregious ones. The bills do
nothing to support EBSA's key mission at a time when it is
understaffed and underresourced.
Today's hearing unfortunately shows that my Committee
colleagues do not want to stop there. Even though the facts
show that the volume of ERISA class action litigation is
incredibly small, compared to the total number of retirement
plans. Again, I would be happy to work with the witnesses and
my colleagues to eliminate the inefficiencies.
Overall, we have to be more aggressive to protect American
workers retirement plans efficiently. We should be working
together to strengthen and expand ERISA's protections, and not
undermine them. I thank the witnesses, and yield back.
Chairman Allen. I thank the gentleman for yielding, and now
I recognize myself for a closing statement. I want to thank our
witnesses again for your expert testimony. Frivolous lawsuits
impose serious financial and reputational costs to employers. I
stand by that statement.
Ultimately, these lawsuits suck up time and resources that
should be spent helping Americans save. Some class action
lawyers have spawned a litigation racket, exploiting ERISA to
extract massive settlements without merit.
Meanwhile, employees, employers and retirees, all lose out
as legal fees soar, resources are drained, and their optimal
investment risk are, you know, at risk. ERISA was designed to
protect retirement savings, not to bankroll a business model
for opportunistic lawyers. H.R. 6084, the Erisa Litigation
Reform Act, which we discussed today, protects the retirement
system from predatory lawsuits that are bleeding employers and
feeding on benefits meant for employees.
Mr. DeSaulnier, I will be happy to work with you on that
legislation, so that we can solve this problem and move on to
the myriad of other issues facing the American people. I would
again like to thank all of our witnesses, and that testified
before the Committee. Without objection, there being no further
business, the Subcommittee stands adjourned.
[Whereupon, at 11:54 a.m., the Subcommittee was adjourned.]
[Additional submissions from Chairman Allen follows:]
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[Additional submissions from Representative Fine follows:]
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