House Committee Advances ERISA Litigation Reform

On a party-line vote on March 17, the House Committee on Education and Workforce passed the ERISA Litigation Reform Act, a bill that would make it more difficult for plaintiffs to move through the early stages of ERISA lawsuits. The bill focuses on three areas: 

• Raises the bar for alleging that fees associated with 401(k) plans are excessive.
• Requires plaintiffs in a suit over the purchase of employer securities to allege that the plan paid more than fair market value for the shares.
• Requires that plaintiffs cannot proceed to the discovery phase in litigation unless the case survives a motion to dismiss.

A major impetus for the bill was the Supreme Court's 2025 decision in Cunningham v. Cornell, in which the court unanimously decided that plaintiffs could adequately plead a violation of ERISA’s prohibited transaction provisions by simply stating that a transaction with a party in interest occurred, rather than that a prohibited transaction under ERISA occurred. In an ESOP case, for instance, Cornell could mean that the plaintiffs would just need to allege that one or more parties in a transaction were parties in interest, which would be true almost by definition. That would allow the case to proceed to the next stage, which can include discovery, an expensive and time-consuming process that can lead some defendants to settle even if they think the allegations are without merit. The proposed law would effectively nullify Cornell and require plaintiffs to build out a more detailed factual case in order to proceed. Several former officials with the Department of Labor's Employee Benefits Security Administration (EBSA), as well as many Democrats on the committee, argued that the bill goes too far.