Recent ERISA lawsuits raise fiduciary risk for plan sponsors

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In January, a class-action lawsuit involving The Home Depot's 401(k) plan came to a close after 7 years of litigation. Amid a growing number of lawsuits targeting defined contribution plans, this case serves as a reminder that even well-managed plans may face prolonged legal challenges.

What was the case about?

In 2018, current and former participants in The Home Depot's 401(k) plan filed a lawsuit alleging the company violated its fiduciary duties under the Employee Retirement Income Security Act, or ERISA. The claimants raised two primary concerns.

• Advisory fees and fee oversight: Participants alleged that third-party managed account providers were permitted to charge excessive fees and that the plan's fee structure lacked sufficient transparency.
• Underperforming investment options: The lawsuit also alleged that certain plan investment options consistently underperformed and should have been removed from the plan's investment lineup.

Claimants argued that these alleged failures reduced participants' retirement savings and contributed to meaningful long-term financial harm.

What was the outcome?

In 2022, a federal district court ruled that even if a fiduciary breach had occurred, the participants failed to prove that their losses were caused by mismanagement rather than by market forces or participant investment choices. The US 11th Circuit Court of Appeals upheld this decision in 2024, prompting the plaintiffs to ask the US Supreme Court to review the case.

In January 2026—2 days before the Supreme Court was set to decide whether to take up the appeal—both sides jointly requested that the case be dismissed and agreed to pay their own legal expenses. As a result, the lower-court rulings remain in place.

Who is impacted

While this case ultimately favored the employer and didn't establish new nationwide legal standards, it underscores the importance of proactive governance for all stakeholders, including:

• Employers offering participant-directed retirement plans, such as 401(k)s and 403(b)s
• Plan sponsors and fiduciaries responsible for selecting investments and service providers
• Retirement plan committees that oversee governance and vendor relationships

What action is required and when

Legal experts have noted a recent uptick in ERISA lawsuits over the past year, and these cases can be costly and time-consuming even when employers ultimately prevail.

To help mitigate risk, plan sponsors should reevaluate their governance practices and ensure they include the following information.

1A well-documented, prudent process

Courts continue to focus on whether fiduciaries follow a thoughtful and consistent decision-making process, rather than rely on investment results alone. Regular plan reviews and thorough documentation remain essential.

2Thorough review of fee structures and disclosures

Even when overall fees are competitive, how fees are structured and communicated can draw scrutiny. Sponsors should periodically evaluate advisory, recordkeeping and investment expenses for both reasonableness and transparency. Conducting a retirement plan request for proposal is one way to support these efforts.

3Close monitoring of investment options

Investment performance can fluctuate, but fiduciaries are expected to monitor options against established criteria and take action when investments no longer align with plan objectives.

4Periodic plan benchmarking

In addition to supporting fiduciary responsibilities, retirement plan benchmarking can help optimize plan design, manage costs, evaluate market competitiveness and improve employee participation.

Who you should talk to now

While proactive governance can't eliminate the possibility of claims, it can help mitigate risk. Regular review of plan operations, vendor relationships, fees and investment options—along with clear documentation of decision-making—can help demonstrate fiduciary diligence if a plan is challenged.

At the same time, differences among federal courts remain, and future cases may continue to test how loss causation is evaluated under ERISA. If you have questions about ERISA requirements or fiduciary responsibilities, connect with an institutional asset management partner. Our team can help you evaluate your plan's governance practices and identify opportunities to strengthen oversight.