Employers sponsoring defined contribution retirement plans for their employees face unprecedented exposure to claims from plan participants. Most notable of these exposures is the continued frequency and severity of excessive fee litigation in which plan participants allege that plan sponsors and their fiduciaries breached their duties under the Employee Retirement Income Security Act of 1974 (ERISA) by overpaying for third-party providers of investment management or administration services.

Since 2005 there have been more than 565 excessive fee lawsuits filed against plans of all asset sizes. And the frequency of filings shows no sign of slowing down as over 70 such claims have been filed so far this year, placing 2025 on pace for the second highest number of annual excessive fee filings ever.

Excessive fee allegations tend to be very fact-specific, and thus, it is estimated that defendants have just a 20-25% chance of winning motions to dismiss. Cases that are not dismissed on motion then move to the terribly costly and time-intensive discovery phase, so are often settled. To that end, retirement plan excessive fee cases have resulted in settlements totaling over $1.85 billion – not including defense costs.¹ As a result, primary fiduciary liability insurers now mandate much higher retentions – often of $1M or more – for excessive fee claims.

Of recent concern is the surge in so-called “plan forfeiture” cases. Plan forfeiture cases involve how a defined contribution plan sponsor uses the company matching funds provided to employees who leave the company before those funds fully vest. Historically, many companies have used these forfeited funds to pay for their own future matching contribution obligations rather than to defray plan expenses on behalf of plan participants. This approach has been a “long-standing industry practice... [and] is explicitly mandated by guidance from the Treasury Department issued in 1963... In addition, the Treasury Department issued a proposed regulation in 2023... in which it clarified that using forfeiture dollars to reduce employer contributions... is acceptable.”²

Still, it is being challenged by the ERISA plaintiffs’ bar which has filed more than 65 plan forfeiture cases in the last 18 months. In the absence of other allegations, plan forfeiture cases do not relate to the level of fees charged by third-party service providers or whether such fees are excessive or unnecessary. Nevertheless, fiduciary liability insurers consider them part of the excessive fee litigation wave and routinely apply the higher excessive fee retention when adjusting these claims.

The plaintiffs’ bar has also started applying a similar theory of liability in cases against welfare benefit plans. Several cases have been filed against plan sponsors on the theory that the cost of prescription drug benefits and fees paid to pharmacy benefit managers (PBMs) were excessive. Another recent case alleges that the various health plan options provided to participants were additional cost with no additional value. These cases are in the initial pleading stages and it is unclear whether the plaintiffs will prevail, but they demonstrate the continued risk plan sponsors and fiduciaries must keep in mind.

If you have any questions about your coverage or are interested in obtaining coverage, please contact your Aon broker.

1 - Aon’s analysis of various public sources among which are bloomberglaw.com and plansponsor.com; “Excessive Litigation Over Excessive Plan Fees In 2023,” Chubb; “2024 Excessive Fee Litigation Webinar,” Encore Fiduciary
2 - George Sepsakos, Esq., Groom Law Group, “Forfeiture Litigation Continues”, plansponsor.com (October 2025)