22% of ERISA Lawsuits in 2025 Involved Health Plans

Justin Bove

In 2025, there were near-record levels of fiduciary class lawsuits. Of the 155 complaints filed by plaintiffs’ law firms alleging violations of the Employee Retirement Income Security Act and breaches of fiduciary duty, 35—22%—involved health plans, the largest subcategory behind defined contribution plans (63%). The Consolidated Appropriations Act of 2021 included provisions to increase fee disclosure requirements from service providers to health plans, leading to an increase in class litigation against those health plans.

Encore Fiduciary, with the help of the Dorsey & Whitney LLP law firm, analyzed all of 2025’s lawsuits, and the first half of the findings looked at overall legal trends. This second installment focuses on health plan litigation, including the rising number of lawsuits related to premium surcharges on tobacco users and voluntary benefit programs. As health plan fees are scrutinized more by plan participants and plaintiff firms, one can anticipate increased legal activity.

Settlements: Less Than $70 per Plaintiff

Of the more than 600 excessive fee lawsuits filed against ERISA plans over the past 10 years, very few made it to trial. Based on our internal database, between 60% and 65% survived the motion-to-dismiss phase, at which point plan sponsors and fiduciary insurers were faced with spending millions of dollars to produce documents in discovery and proceed toward trial. At this stage, plaintiff firms used this leverage to procure high settlements, as their case load does not permit them to try all of these cases, even if they wanted to do so—which they do not.

What are plaintiffs gaining through settlements? In 2025, there were 28 settlements of excessive fee and imprudent investment lawsuits, with an average settlement of more than $3 million when removing the largest outlier—the $69 million settlement of Snyder v. UnitedHealth Group. The average settlement for tobacco surcharge litigation was even higher, at almost $5 million.

Our internal data indicated that in the last five years, there have been more than 200 settlements of excessive fee and imprudent investment lawsuits, totaling more than $1.3 billion. Plaintiff law firms typically get 33% of these settlements, which calculates to almost $450 million.

Based on our calculations and analysis from Davis & Harman, it appears that individual plan participants each obtain approximately $55 to $70, on average, from these same settlements.

Plaintiff firms have even gone on the record stating their goal is to survive the motion to dismiss, as one leading plaintiff firm was cited recently saying: “We don’t know. … So we made the claim and then we will see if we can survive the motion to dismiss.”

Fiduciary class litigation will only slow down if plaintiff firms lose the ability to leverage high settlements and can no longer significantly profit from filing so many cases against ERISA plan sponsors. It does not appear that legislative change is likely, as Encore recently wrote.

The Latest Trend? Tobacco Surcharge Cases

In lawsuits related to tobacco surcharges, plaintiffs allege that plans imposed premium surcharges to tobacco users in violation of ERISA and nondiscrimination rules under the Health Insurance Portability and Accountability Act. They also allege that wellness incentive programs which offer a reasonable alternative standard to earn or recoup the “full reward” are not in compliance with federal law.

Prior to 2024, one tobacco surcharge lawsuit was brought by the Department of Labor, and within two weeks of bringing suit, a judgment of less than $150,000 was rendered. In 2025, 25 such lawsuits were filed, up from 22 in 2024. Thirty lawsuits over the last two years were filed by one plaintiff firm, with two of those lawsuits resulting in settlements of almost $5 million.

More than 10 cases have received rulings on motions to dismiss, and courts have ruled in favor of the plaintiffs in all other cases, allowing the suits to proceed partially or fully. The one case which was fully dismissed, Williams v. Bally’s Management Group, has subsequently been appealed. Given the success rate in courts—and the quick and high settlements obtained in these cases—tobacco surcharge lawsuits seem likely to be the main fiduciary claim trend to watch in 2026.

Voluntary Benefits Allegations

On December 23, 2025, one plaintiff law firm filed four class lawsuits in two different district courts, targeting voluntary benefit plans. The lawsuits alleged breaches of fiduciary duty by employers for failing to monitor the commissions earned by their benefits consultants. Interestingly, the lawsuits named these benefits consultants as defendants, alleging they acted in a fiduciary capacity, rather than merely as a service provider.

The lawsuits are one of many filed following the Supreme Court’s ruling in Cunningham v. Cornell, as plaintiff firms anticipate a lower bar to survive a motion to dismiss by alleging a prohibited transaction occurred. The DOL has established a safe harbor for voluntary benefits, exempting them from ERISA requirements if certain conditions are met. It is noteworthy that all four lawsuits allege the employers failed to comply with the DOL’s safe harbor, in part by filing Form 5500s with respect to each plan. These cases will be closely monitored to see if additional lawsuits will be filed and, if so, how allegations relate to compliance with the DOL’s safe harbor.

Excessive Prescription Drug Cost Allegations

At the beginning of 2024, it was forecasted that excessive fee allegations targeting the cost of prescription drugs in health plans would become the next wave of ERISA litigation. Two cases filed in 2024 are still making their way through the courts. Both cases were initially dismissed due to lack of standing, but the plaintiffs have amended their complaints and—in Lewandowski v. Johnson & Johnson—appealed to the U.S. 3rd Circuit Court of Appeals.

Accordingly, only one such lawsuit was filed in 2025, albeit with slightly different allegations in an effort to secure standing. If a road map is identified in which plaintiffs can secure standing in these cases, there may be additional lawsuits filed. In the meantime, some plan sponsors have proactively sued their pharmacy benefit managers, alleging a lack of transparency and alleging PBMs have unfairly driven up prescription drug prices. PBMs have also been increasingly scrutinized by regulatory agencies with similar concerns, which has likely stalled this legal theory.

Ghost Network Allegations

One class lawsuit, Hecht v. Cigna, saw significant development in 2025 that bears monitoring. Originally filed in 2024, the complaint alleges that Cigna breached its fiduciary duty and violated ERISA by failing to monitor its provider network, creating a “ghost network” which inaccurately represented out-of-network providers as being in-network.

While previously thought to be an administrative function, in February 2025, the breach of fiduciary duty allegation survived the motion to dismiss. A district court ruled that “repeated and systematic failures” by Cigna were sufficient to “plausibly suggest a breach of ERISA’s duties of loyalty and prudence.” By October, the parties announced a settlement agreement for almost $6 million. This ruling impacts plan sponsors significantly, as the ERISA violation exposes the potential for equitable relief under Section 502(a)(3), which many fiduciary carriers do not affirmatively cover.

Can the Legal Landscape Change?

By expanding their allegations against ERISA plans, plaintiff firms unlocked the ability to sue individual plan sponsors—and sometimes individual plans—multiple times. More than a dozen companies faced multiple class ERISA lawsuits over the past two years, some filed by the same plaintiff firm.

It does appear that regulatory change is beginning to happen. As noted above, the DOL filed an amicus brief in a forfeiture case in which it sided not with the plaintiffs, but with the defendants. In January, the DOL filed similar amicus briefs in three additional forfeiture cases and in a pension risk transfer case. These briefs reveal the DOL’s approach shifting from a “pro-plaintiff” focus to a “pro-system” focus, siding against plaintiffs in individual cases to concentrate on the bigger picture and ensure that employers can continue to provide retirement and health benefits to employees without the threat of being sued.

Justin Bove is the chief revenue officer and fiduciary lead for Encore Fiduciary.

This feature is to provide general information only, does not constitute legal or tax advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author do not necessarily reflect the stance of ISS STOXX or its affiliates.