▶ 0:02:51I wanted to get by to speak to you before we started, but things got a little busy this morning. But thank you uh for being here. Uh 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.
▶ 0:03:11Today's hearing is about protecting the retirement savings of American workers and employers who voluntarily maintain retirement savings and other employee benefit plans from baseless predatory class action Employer sponsored retirement plans are the backbone of the American retirement. Employer sponsored health care and other plans provide important benefits to American workers and their families.
▶ 0:03:37The Employee Retirement Income Security Act, ORISA, helps protect retirement, health, and other benefits for more than 155 million workers, retirees, and their family members. Altogether, these plans hold more than 14 trillion, helping millions of Americans save for the future and stay financially secure. These assets represents the savings and contributions of workers and their employers.
▶ 0:04:05But make no mistake, such a large pool of assets is attracting predatorial 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.
▶ 0:04:26On 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 American savers are protected.
▶ 0:04:46My bill to ensure that investment fidiciaries are focused on maximizing returns for Orisa plan investments rather than on woke ESG factors passed the committee earlier this year. Congressman Fine has introduced legislation with solutions to the problems we will hear about today. I look forward to discussing this bill and other efforts to protect Orisa plan participants and their benefit plans.
▶ 0:05:11I want to thank our witnesses today who have frontline experience fending off meritless quick money lawsuits from class action attorneys. We'll hear today how benefit plans, the employers who offer them in plan managers are being targeted by attorneys looking for big payouts. We'll also ask an important question. Are these lawsuits helping American workers or just lining the pockets of trial lawyers?
▶ 0:05:40We'll also hear how these lawsuits are changing the way ORISA 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.
▶ 0:05:56Thank you, Mr. Chairman, and thank you to our witnesses for being here today. Uh workers deserve to earn a decent wage, provide for themselves and their families, and retire with dignity. It's the American way when we do it right. But right now, they are facing an economy that isn't 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. Why consumer prices continue to go up.
▶ 0:06:24This 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.
▶ 0:06:44Excuse me.
▶ 0:06:45You're out of time. [laughter] Apparently something's going on about my security system 3,000 miles away, but I'm sure it's not you, Mr. Chair, probably Mr. Wahberg. In July, the subcommittee held a hearing examining the Department of Labor's Employee Benefit Security Administration, known as EPSA, pronounced EPSA, which is vital agency that protects workers hard-earned health and retirement benefits.
▶ 0:07:13Regrettably, EPSA 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 wouldn't have to deal with lawsuits.
▶ 0:07:43Under the Employee Retirement Income Security Act, known as Orisa, 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.
▶ 0:08:11This case involved 28,000 plaintiffs who alleged that the 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 a violation occurred to survive a motion to dismiss. The Supreme Court ruled that they did not. This ruling ensured that the very point of ORISA to protect benefits is realized.
▶ 0:08:40In the months that have followed the Supreme Court's unanimous decision, there has not been any spike in ORISA litigation as some feared. One major law firm that defends corporations acknowledged that the decision quote has not yet resulted in material increase in recordkeeping fee challenges or Orisa excessive fee lawsuits close quote.
▶ 0:09:04Based on the title of today's hearing, I suspect we will hear a lot about so-called frivolous ORISA class action litigation. According to the Congressional Research Service, there were 586 class actions filed between 2020 and 2024, which represents just a minuscule fraction of the over 800,000 private sector retirement plans.
▶ 0:09:28Yet, despite these facts, committee Republicans recently introduced legislation that functionally overturns the unanimous Supreme Court decision in Cunningham versus Cornell. It 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 Orisa's fundamental protections.
▶ 0:09:51We should ensure that workers and retirees are empowered to stand up for themselves and their families if denied the health care benefits they deserve. For example, I previously introduced the employee and retirey 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.
▶ 0:10:19This 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'd be more than happy to work with you on your bill and my bill to see if we can avoid inefficiencies in American workers getting the pension plans that they paid into and their employers contributed to. Thank you. I yield back.
▶ 0:10:44I thank [clears throat] the ranking member. Uh, pursuant to committee rule 8C, 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 5:00 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.
▶ 0:11:15I'll now turn to the introduction of our four distinguished witnesses. Our first witness is Mr. Andrew Salakam Salakram, 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.
▶ 0:11:39William Alvarado Riviera Rivera, the senior vice president of litigation at the A AARP Foundation in Washington DC. Our last witness is Mr. Glenn Budish, uh the chair of the um ERIC legal center for the Orisa Industry Committee in Washington DC. And thank you again for being here today.
▶ 0:12:08Uh we thank our witnesses and we look forward to your testimony. Pursuant to committ committee rules, I would ask that each of you limit your oral presentation to a threeminut summary of your written statement. As committee members have many questions for you, the clock will count down from three minutes. Pursuant to committee rule 8D and committee practice, however, you will not be cut cut off your testimony until you reach the five minute mark.
▶ 0:12:36I would also like to remind the witnesses to be aware of their responsibility to provide accurate information to the subcommittee. I now recognize is recognize Mr. Salakram for your testimony.
▶ 0:12:52Good morning, Chairman Allen, Ranking Member Donier, and members of the subcommittee on health, employment, labor, and pensions. My name is Andrew Salakram. I'm a principal at Groom Law Group, a law firm specializing in all aspects of employee benefits. I'm the practice group leader for Groom's ORISA litigation group where I have represented ORISA litigants for over a decade. In enacting ORISA, Congress sought to strike a balance between protecting employee retirement benefits and incentivizing employers to offer them.
▶ 0:13:20A balance has grown a skew in the context of ARISA 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 enrich the class action plaintiff's bar at the expense of American workers. A 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, must plausibly allege that a defendant committed wrongdoing.
▶ 0:13:48Unfortunately, courts too often hand Orisa class action plaintiffs the keys to discovery based on innocuous allegations. For example, allegations that a 401k plan paid a service provider for necessary services or that an employee stock ownership plan purchased employer stock from the company's owner can be enough to state a statutory breach. Of course, risk of 401k service provider engagements and esop stock purchase transactions are commonplace and in fact necessary to the very existence of both types of plans.
▶ 0:14:18Congress in creating Orisa's careful balance 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 and administered a retirement plan. Common sense legislation is therefore necessary to ensure that ORISA plaintiffs are required to plead something rather than nothing.
▶ 0:14:42Without such a course correction, an opportunistic plaintiff 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 a plaintiff's case.
▶ 0:15:04This is especially true for litigation involving plaintiff firms that abuse the discovery process to increase the baseline cost of defense and ratchet up settlement pressure. Tactics include suing a large number of unnecessary defendants to financially stress the indemnator sponsor company, suing the family members of alleged fiduciary defendants, including in a recent instance an infant, and issuing voluminous and unduly burdensome written discovery.
▶ 0:15:28The 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's happened in the ESOP space where certain courts have long held that a plaintiff alleges a statutory breach by claiming that an ESOP did what it was designed for, simply purchasing employer stock. Companies who wish to establish ESOPs regularly site litigation risk as a reason they have not done so.
▶ 0:15:52and those that have established ESOPs bear skyrocketing fiduciary insurance costs costs that are ultimately 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 quote serious concern that his holding would contribute to quote an avalanche of meritless litigation. Unfortunately, Arisa's text tied the court's hands.
▶ 0:16:15And 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. Legislative action is thus necessary to revise Orisa's text 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 I now recognize Miss Dudley for your
▶ 0:16:47Thank you, Mr. Chairman, and and thank you, Ranking Member Doln, 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 the title wave of inappropriate and yes indeed frivolous litigation that is draining resources away from benefits, inhibiting innovation, preventing many new
▶ 0:17:18products and services from being offered and benefiting only plaintiffs lawyers. We strongly support the committee's attention to this crisis and representative fines bill which would override a Supreme Court decision in Cunningham versus Cornell University that even the court admitted was not the right answer. I'd like to make three uh important points uh today in my testimony. First, the title wave of litigation is hurting plan participants.
▶ 0:17:48We conducted an informal survey of our plan sponsors and found that almost 89% 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, the only the plaintiff's lawyers are really benefiting from the litigation.
▶ 0:18:14For example, from the period 2009 to 2016, attorneys representing plaintiffs in a breach of fiduciary duty lawsuits are estimated to have collected roughly $24 million for themselves while securing an average per participant award of $116. And it's gotten a lot worse since 2016.
▶ 0:18:40Third, the Cornell case, which the fine bill would override, will make a terrible situation even worse. Under Cornell, a plainif 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. So the plaintiffs offer to settle, save for six million.
▶ 0:19:11The plaintiff's lawyers walk away with a third of that, two And and and participants really get next to nothing. And all they've done, all the plaintiffs attorneys have done is filed a boilerplate complaint. And the this can be repeated all over the country with the exact same result.
▶ 0:19:33And that means the cost of plans and the availability of services and products in those plans and the outcomes reduced for participants are all of all hurt 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
▶ 0:19:59Thank you Mrs. Dudley. Now Mr. River Vera, we welcome you for your testimony.
▶ 0:20:06Good morning. Thank you, Mr. Chairman, members of the subcommittee. Thank you for inviting me to testify today as senior vice president for litigation at AAP Foundation. I am honored to speak on behalf of AARP, which advocates for the 125 million Americans aged 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.
▶ 0:20:36And 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 Orisa. It is a strong reminder of Congress's intent to protect the retirement security of millions of hardworking Americans. We've moved away from the old days of guaranteed pensions to plans like 401ks where folks are now expected to shoulder more of the responsibility and bear the risk for their own retirement.
▶ 0:21:06That's why Orisa exists to make sure the people managing these plans play by the rules. They're 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.
▶ 0:21:29When 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, savers suffer lower returns and face higher costs. Orisa gives savers the power to fight back and ensure accountability.
▶ 0:21:53The Supreme Court's unanimous decision, let me repeat that, unanimous decision in Cunningham reaffirms Orisa'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 Orisa, a plaintiff need only plausibly allege the elements of a prohibited transaction just like any other case.
▶ 0:22:22The 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? Because Orisa 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.
▶ 0:22:51If 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.
▶ 0:23:17When 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 Brook Cunningham decision will invite a flood of so-called frivolous ORISAL lawsuits, burdening plans and fiduciaries. These concerns are overstated and ignore the data.
▶ 0:23:45Far from being frivolous, these cases often uncover real harm, leading to reforms like re 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 isn't a threat to retirement security. It's the very thing that protects it.
▶ 0:24:15Congress should stand firm and reject any attempt to pile more burdens on America's working class or weaken their ability to enforce their rights. AP urges the subcommittee to make sure participants can protect their hard-earned life savings under ORISA, 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.
▶ 0:24:40Thank you, Mr. Rivera. I recognize Mr. Bhach for your testimony.
▶ 0:24:46Thank you, Chairman Wahber Wahberg, Ranking Member Scott, and Ranking Member Donier, and members of the subcommittee. Thank you for the opportunity to test to testify today. My name is Glenn Butach and I'm chair of the ERIC Legal Center, part of the Orisa Industry Committee or ERIC is a national advocacy organization representing the interests of some of the largest employee benefit plan sponsors in the United States.
▶ 0:25:14The Eric Legal Center advances policy positions on behalf of its members in the courts, primarily through the filing of Amikas Curi briefs in cases that raise significant legal issues. Over [clears throat] the past 15 years, there's been a surge of cases brought by a handful of class action law firms against benefit plans and their According to one recent study, since more than half of plans
▶ 0:25:44with more than a billion dollars in assets have been targeted for litigation, some more than 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 planned participants.
▶ 0:26:13And if there's 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.
▶ 0:26:34The distraction of plan professionals, plan administrators and plan admin plan investment teams who need now to um gather documents and respond to discovery in the lawsuit. And there's also the very real potential to distort fiduciary decisionmaking which would which would be an unintended All of this is to the detriment of the retirement system that protects so many American workers.
▶ 0:27:02Eric 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 planned service provider constituted a prohibited transaction. Also to allege why the exemption that Congress wrote for reasonable contracts or arrangements with ser service providers does not apply.
▶ 0:27:32Second, Congress should require in any case relating to plan costs or plan investments that the plaintiff plead a meaningful contextspecific benchmark genuinely supporting an inference that the plan fiduciary's process was flawed. And third, discovery should be stayed while any motion to dismiss is pending.
▶ 0:27:56Notably, none of these changes would detract from the right of plan participants who are genuinely agrieved to have their day in court. I welcome your questions. Thank you.
▶ 0:28:10Uh, thank you, sir. And now, under committee rule nine, we will question witnesses under the five-minute rule. I will recognize myself for five minutes. Um, Mr. Selectum, we have heard testimony today that predatory class action attorneys are targeting large employee benefit plans and large employers for quick dollar settlements.
▶ 0:28:36In your experience, what percentage of the plans and fidiciaries you have represented in litigation operated prior to the litigation with uh teams of experts to ensure they meet their fidiciary duties?
▶ 0:28:51Well, I'm trying to think of an exception and I and I can't. So I'll say 100% or very nearly 100%.
▶ 0:28:59Uh would you say that the plan and fidiciaries that are being sued are compliant with the law?
▶ 0:29:06absolutely. Uh you know Orisa um and as the Supreme Court has acknowledged uh requires fiduciaries to make difficult tradeoffs uh and and fiduciaries can make a wide range of decisions that are are reasonable. uh and the vast majority of fiduciaries in my experience uh are doing their very best considering appropriate information um consulting with with experts uh to arrive at reasonable decisions that are in participants best interest.
▶ 0:29:35Is it safe to say it is not breaches of the fidiciary duty that are attracting class action lawsuits but rather it is the pools of money in these plans that attract cla class action lawsuits?
▶ 0:29:49Uh that's accurate. Um, PL plaintiffs typically target the the largest plans they can find with the most participants in them. Um, those large plans bring with them the potential for larger damages arguments from the plaintiff's side. Um, and also often come with larger insurance policies. And you know, plaintiffs are laser focused on insurance policies and settlement discussions and immediations.
▶ 0:30:14They really make no secret that it's it's less about the merits and more about how can I uh com compel you, you know, impose discovery costs that uh will compel you to you turn over your insurance policy in a settlement.
▶ 0:30:30So when these settlements are reached, does it benefit the 401k employees and their plans or does it benefit the the company who's providing funds matching funds for those plans or do the lawyers get all the money?
▶ 0:30:48The lawyers uh benefit for for sure. Um they you know
▶ 0:30:54and you're guilty until you prove you're innocent. That is pretty much
▶ 0:30:58that is that is the
▶ 0:31:00that's not jurist prudence at all. That's not how our c country operates.
▶ 0:31:05Thank you. Uh Mr. Bish, 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 fidiciaries.
▶ 0:31:19What percentage of these law uh lawsuits were copycat or boilerplate allegations seeking a quick So, I can't give you an exact percentage, but I do know that in certain areas that has been the focus of these lawsuits when you read the you read that a new complaint has been filed and I will go and I'll read read the complaint and it it sounds very familiar and a lot of the a lot of the um allegations are not defendant specific, but they're the
▶ 0:31:49um they're they present the the arguments that you see in in each of these cases. So they tend to be very cookie cutter lawsuits with very little defendant specific research.
▶ 0:32:02Would you explain what you have seen with respect to frivolous class action lawsuits? You give us some examples.
▶ 0:32:09We're seeing a there's been an enormous number of cases relating to plan uh costs obviously plan recordkeeping costs but also investment costs. There are also uh mo tons of cases relating to the use of plan forfeitures uh in in 401k plans and um the argument that there was a breach of fid fiduciary duty in the use of those forfeitures even though the plan document permits using them for such things
▶ 0:32:39as defraying uh an employer
▶ 0:32:44M Dudley, you you have 36 seconds. you look like you need to add something to this uh
▶ 0:32:49I do discussion.
▶ 0:32:51Well, the the thing that I would add I in the 43 years I have worked with plan sponsors, I have never seen litigation like it is today. It is it is exponentially uh more and the number of cases that are what I refer to as frivolous because they're just repetitive copycats.
▶ 0:33:12You'll see a dozen of the essentially the same complaint filed scattered across the country or and what might be forfeitures or it might be fees or it might be underperformance 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 um in in impact on the plans.
▶ 0:33:39Thank you. I now recognize M. Sier, our ranking member, for the p purpose of questioning the witnesses.
▶ 0:33:47Thank you, Mr. Chairman. I think we're all agreed since I'm not an attorney that we could, no offense to any attorneys who are in a position of leadership on this committee. Um, but we could use less attorneys and lawsuits. And in that regard, this committee subcommittee heard testimony from the head of EPSA recently that they only had one investigator for every 14,000 health plans.
▶ 0:34:13So it strikes me that we could actually do something constructive by getting more u investigators. So before we have the lawsuit, we could come to a conclusion and enforce the existing laws or where there are gaps. Uh during Bush 2, we were promised that these kind of investments and movements in Americans retirement plans to 401ks would benefit everybody. And the facts that we have in front of us, that is not what was has come to fruition.
▶ 0:34:42As a former small uh this doesn't help the American workforce in terms of its security. uh people under 40 um don't have retirement accounts and their their ability to move up and get wages and be able to contribute um has diminished in the last two decades. Mr. Rivera, um thank you for being here. Hardly a radical organization are coming here and expressing its feelings.
▶ 0:35:11Um, could you tell us just this decision, this unanimous decision, how important it is to for the financial stability of American workers in retirements and enforcing it in a way that makes these investments safer, not at higher risk. It's incredibly valuable to American workers and savers.
▶ 0:35:36The resetting and leveling of that playing field that had previously been split often against workers and retirees is now restored. And again, it was nine to nothing. For a Supreme Court that doesn't often agree uh let alone unanimously, I think it's 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're talking about here.
▶ 0:36:03These are prohibited transactions, not questionable, not we might want to think about this little harder transactions. These are prohibited transactions and Congress prohibited them for a reason because they're 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.
▶ 0:36:25But that's exactly the way it should play out because having the burden placed on the retiree or the beneficiary doesn't 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.
▶ 0:36:46and 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. So, Justice Sotomayor on behalf of the entire court noted that it made little sense to put that burden on the retiree and 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
▶ 0:37:16that 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 uh have a significant impact in the long term. Mr. Vera, um we have numbers that uh middle inome Americans have on an average about $65,000 in retirement savings. Uh the lowest um quarter of Americans have zero.
▶ 0:37:47So Americans are working longer. Uh we've had a 40% 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. That's a significant problem. There is a retirement crisis in the United States. People are living longer, which is generally good. Uh people are working longer both by choice and by need.
▶ 0:38:14But 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 uh simply isn't enough for them to carry on.
▶ 0:38:28So the importance of preserving retirements through ORISA 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
▶ 0:38:45Thank you, Mr. Rivera. Thank you to all the witnesses again and thank you, Mr. Chairman. I yield back.
▶ 0:38:50Gentleman yields. And I now call on our esteemed chairman, Mr. Wahlberg, for five minutes of questioning. Thank you, Mr. Chairman, and thanks the panel for being here. Orisa, I guess in in comparison, Orisa, like uh Farm Credit has been an amazing amazing factor for uh for retirement and for planning for retirement from for giving employees and business owners an opportunity to combine and work together and
▶ 0:39:20offer choices. And I I think it's a truth that alternative assets or assets that are private offerings uh offer competitive returns and opportunities for diversification for 401k investors. Uh that being said, on August 7th, President Trump issued an executive order on democratizing access to alternative assets for 401k investors.
▶ 0:39:46The order stated that, and I quote, "Bburdensome lawsuits that seek to challenge reasonable decisions by loyal, regulated fidiciaries have denied millions of Americans opportunities to benefit from invest investment in alternative assets." End quote. Um, Mr.
▶ 0:40:08Graham, uh, could you discuss whether burdensome lawsuits are discouraging 401k fiduciaries from innovations such as alternative assets uh that could improve retirement outcomes?
▶ 0:40:24Um, fiduciaries operate in in a challenging complex environment. um they're presented with everchanging facts and circumstances that uh that as you say require innovation and creative solutions um so that participants uh obtain the benefits of their retirement plans.
▶ 0:40:42Um and fiduciaries who are seeking to innovate um are threatened by meritless frivol frivolous lawsuits in the same way that that fiduciaries who are uh engaging in the more mundane aspects of plan administration are threatened. they're all threatened. Um and and it uh the litigation is a powerful disincentive to um fiduciaries to to um to to make uh innovative choices and and come up with creative solutions. Certainly.
▶ 0:41:12Okay. Um Mrs. Dudley, could you answer that same question from your experience?
▶ 0:41:18It's it's a great question. Uh Mr. Chairman, recently
▶ 0:41:22mic microphone.
▶ 0:41:23Oh, sorry. We recently conducted an informal survey of our plan sponsor members and almost 89% of the defined contribution plan sponsors noted that uh the risk of litigation is a significant factor in their decision to offer services and investment options or products to their participants.
▶ 0:41:51So it is the impact of and the risk of litigation is affecting plan sponsors and their decision and their ability to offer a wider range of services and benefits to their participants and that hurts participants. That hurts everybody
▶ 0:42:13and not a risk of legitimate litigation.
▶ 0:42:16This is not legitimate. If you have a legitimate claim, nothing anybody is suggesting here would affect that. If you have a process-based uh violation that you need to bring to the court, overriding the Cornell decision does not prevent you from taking that to court. Mr.
▶ 0:42:36But um I detect that you'd like to answer the same question if you if you could indeed discuss whether burdensome lawsuits are discouraging innovations.
▶ 0:42:50Thank you. Um Mr. Chairman, I think the the litigation environment does does discourage innovation. And it it tells fiduciaries even though they know they are supposed to act in the best interests of participants and with the duty of prudence and loyalty. It does tell them that if in certain areas if I make this particular decision there's the potential for a lawsuit. And I we would be naive to think that that doesn't color some some of their some of their analysis.
▶ 0:43:20I think the issue goes beyond the the issue of alternatives which is a very common asset class. every DB plan owns alternative growth assets in their in their portfolios. Um to me personally, adding that to to a a 401k uh fund um uh shouldn't be that controversial, but it it extends to many other uh areas as well, such as um the ability to offer um lifetime
▶ 0:43:50income as an as a distribution option in a defined contribution plan. I mean, that's difficult to do and I think that the risk of litigation is is is serving as a break on on some of those innovations which would benefit retirees.
▶ 0:44:06Okay. Well, I appreciate the answers and I I think we're again we want to foster that competition for the good uh and for the benefit and litigation though necessary at times certainly is in my mind prohibitive when it's abused. Mr. Chairman, I yield back. I thank the chairman and uh now I call on Mrs. McBath, Representative McBTH from the great state of Georgia.
▶ 0:44:31Thank you, Mr. Chair. Uh thank you so much each and every one of you for joining us this morning and I have read your testimonies. Although I don't have any formal questions for you today. I would just want to caution that in the climate that we're in financially, a lot of Americans are very considered about every penny. They want to make sure they're not losing any pennies. They want to make sure that they are their investment uh for retirement is is funded, fully funded and protected.
▶ 0:44:59So, I think that we need to make sure that we're not erroneously um saying that people are deliberately filing u frivolous claims because oftent times when it is their life savings, it's critically important to them uh even though the fiduciary may not think so.
▶ 0:45:16But 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 uh my House Republican colleagues are pushing legislation that directly undermines every day Americans ability to be able to defend their legal rights in court. They aren't undermining any just any legal rights here either.
▶ 0:45:42They are trying to chip away at the American people's ability to protect what they have 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.
▶ 0:46:11They 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.
▶ 0:46:30Instead 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.
▶ 0:46:57Instead of looking at these cases on their individual merits or evaluating them on a case-bycase 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's the real purpose of these efforts here today. The real purpose is not to protect retirement benefits for workers at all.
▶ 0:47:23House 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.
▶ 0:47:42Instead 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.
▶ 0:48:05If they really wanted to protect Americans from having to unexpectedly go back to work in their 70s and their 80s, 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 the retirement in each and every one of their paychecks.
▶ 0:48:35They 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 isn't really yours to benefit from. They're trying to convince you that they pay you to give up your fund.
▶ 0:48:58um that they pay you, excuse me, they are trying to convince you that the pay you give up to fund your social security and your retirement doesn't really belong to you at all. There's nothing that you can expect to do about it if the money you put away for your future is being mismanaged. It's another attempt by House Republicans to break the promises made to you by your government for generations.
▶ 0:49:23There's 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 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.
▶ 0:49:53Uh thank gentle lady from uh Georgia. And just for our witnesses, I just need to clarify the purpose is as we understand it is that the employees are not suing the employers here. Uh it is the law firms that are benefiting from this process. That's what this hearing is about. So just to clarify that just a point of order there. I now call on Mr. Hunger
▶ 0:50:23for his line of questioning for five
▶ 0:50:25Thank you, Mr. Chairman, and thank you for all the witnesses coming here before the subcommittee today. As a physician, improving our nation's health care system has been one of my top priorities. Um, and a lot of this discussion today is centered around employer sponsored uh defined contribution uh pensions. Um, but I'd like to also learn more about how Congressman finds ORISA litigation reform act could affect health plans and health plan litigation.
▶ 0:50:55I understand that the primary intent of this um bill is again the former um mostly pertaining to recordkeeping or uh or excessive investment management fees. But I'm curious about how this would impact uh both frivolous and legitimate lawsuits related to health benefits.
▶ 0:51:12Uh for example, some employees have uh sued over their employers plans uh under the um Orisa statute for allegedly mismanaging their prescription drug benefits such as Luwendowski v. Johnson and Johnson. That class action lawsuit was dismissed uh due to the plaintiff's failure to adequately allege article 3 standing. Um, Mr.
▶ 0:51:36Salem Baham, in your experience, are the majority of plaintiffs lawsuits against health plan fidici fidiciaries dismissed for lack of
▶ 0:51:46Um, well, we we've we've certainly started to see the plaintiff's bar bleed into the health care space. And you're absolutely right. There have been uh several such lawsuits um essentially copycat lawsuits trying to copy what has been done in the in the retirement space into the healthc care space. Uh and you are correct. There have been dismissals uh based on standing.
▶ 0:52:05Is it generally over over Okay. And are they usually filed over fees or over
▶ 0:52:12Yes, it can be it can be related to fees. It can be related to the um to the the benefits provided uh based on different plan options. Uh correct.
▶ 0:52:20Okay. I'm 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 takes actuarial risk and uh provides uh health insurance to um to his employees uh often with reinsurance.
▶ 0:52:42Earlier this year the committee marked up my bill the self- insurance protection act which uh will would preserve access to this option that lowers health health um costs and qu and improves quality for employers and employees. U Mrs. Dudley, would could you speak to whether Congressman Fine's bill would affect the self- insurance uh um you know, health health coverage system in any way?
▶ 0:53:06Well, the important thing about Representative Fines's bill is that it overrides the Supreme Court decision in Cornell. And in that particular uh decision, anyone who hires a service provider, if if a plan sponsor hires a service provider, you're violating Orisa and you survive the motion to dismiss. But all plans use service providers. You have to use service providers.
▶ 0:53:34And so if you survive that motion to dismiss, you're in the discovery the 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. And then discovery can be upwards of $10 million.
▶ 0:53:55And what it does and it and it would affect all plan sponsors because it it puts pressure on companies to have settlements and it inhibits innovation and the ability to provide services to people. it it's it's not preventing it's not trying to stop legitimate claims. It's addressing a
▶ 0:54:18And thank you. And Mr. Bhes, I'd like to ask you a couple of questions. You testified that there's been a trend in increased frivolous lawsuits, overdefined benefit contribution plans. Have you seen a similar uh trend um in health plans as well, self-insured health plans? It's just beginning and it's something that we we are watching at the Eric Legal Center.
▶ 0:54:43Um we've been very active as an amicus in filing uh cases trying to protect Orisa preeemption from state court encroachment on uniform benefits law. That's a that's a big issue. I know it's not the topic for today, but we're monitoring the health care cases to see uh what what trends might develop.
▶ 0:55:06And that was a point of my self- insurance protection act as well to uh prevent the states from encroaching upon reinsurance, which is essential for most employers to provide employer provided coverage. So, thank you very much. I I yield back.
▶ 0:55:23Thank you, gentlemen, for yielding. Uh, now I call home Mrs. Manion from New Thank you, Mr. Chair. Representative Manion, I'm sorry. [laughter] Thank you. Thank you, Mr. Chair. Thank you to our witnesses. I'm 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.
▶ 0:55:50When Orisa 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 Orisa's provisions and protect the interests of plan participants and beneficiaries.
▶ 0:56:11And just this year, the Supreme Court in a unanimous decision reaffirmed workers rights to have their day in court and recover what they've been owed when their retirement plan is mismanaged. Despite it being a unanimous decision, uh some members of the House and this committee uh have taken issue with it. We've heard a lot of attacks from the other side that class action lawsuits brought by employees are frivolous.
▶ 0:56:37And here today, some have suggested that the ORISA legislation does not benefit plan participants at all, but rather their attorneys. I was a teacher association president representing professionals, teachers, nurses, school psychologists, uh almost 400 of them over the course of eight years.
▶ 0:56:57And in my experience with them, when uh individuals were impacted, uh they were simply trying to protect their livelihoods and hold fiduciaries Mr. Rivera, you've heard these same claims here today and before that the ones that are benefiting most from Orisa litigation are the plaintiff's and is uh in support of this view.
▶ 0:57:26What has been cited is uh that they believe that the settlements are often small for uh what is recovered for plan participants. So given your experience in supporting workers uh who have been harmed, could you respond to the claims uh that we've heard today and talk about some of the victims in the cases that you've worked with?
▶ 0:57:51There is no question that strong enforcement of Orisa has led to better outcomes for plan participants and savers. This is true not only because of the important watchdog function that Orisa 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.
▶ 0:58:21But 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's 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 that issue in that case.
▶ 0:58:51But more importantly, what we see is behavioral change as a result of those cases. It's not just about the money. It's about the practices. It's about competing so that the fees that you charge are lower. As a result of litigation over the history of Orisa, the fees are lower for plan administration and investment. There are better practices with respect to due diligence. There's greater competition so that the ultimate beneficiaries here are the plan and the plan beneficiaries.
▶ 0:59:22Thank you, Mr. Rivera. I yield back.
▶ 0:59:26Thank the gentleman for yielding. And now I call on Representative McKenzie for your five minutes of questioning. 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 aren't excessive, that lawsuits aren't frivolous, and that ultimately that money makes its way uh back to those American workers uh so that they can enjoy their
▶ 0:59:56retirement. Just a couple quick questions that I have uh for the panelists. Uh the first is for Mr. for butach. I understand from your bio that you've practiced Orisa 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 is that a trend line that you're seeing an increase of these?
▶ 1:00:21I I think there I think there has been um trying to think back to earlier in my career the types of ORISA litigation cases that I saw and and and read about and they they seemed there there were um different focuses at different time but there didn't seem to be this deluge of cases and again I I I I comment that they seem to be largely brought by you know a hand a handful of of the same law firms terms and so they're recycling
▶ 1:00:51the same pleading against deeppocketed defendants or large plans in in in in the views of getting um a quick settlement. Um if I may ranking member Donier mentioned the number of investigators at the do compared to the number of benefit plans and it's important to remember litigation is not an investigation tool. you're supposed to have a claim before you file your complaint.
▶ 1:01:19And I think one of the key problems with um with the pleading standard in general and with the Cornell decision in particular um 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 I think it's almost would be imprudent not to engage professional recordkeeper, professional asset manager.
▶ 1:01:45What the Supreme Court said is that if there if you want to allege that that that the that that's a prohibited transaction, all you have to allege is that the um 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.
▶ 1:02:11So, I appreciate that that was a 90 decision and I'm not quarreling with the legal analysis of that decision, but the result is is is I don't know what adjective to describe, but and it would not be novel for Congress to to step in after a Supreme Court decision and to and to return expectations to where they were.
▶ 1:02:33There was a case back in the early 90s called Harris Trust that unsettled um all expectations in the particular issue that was that issue in in Harris Trust. And a few years later, Congress passed legislation to address the Harris trust decision.
▶ 1:02:50So, we really commend Representative Fines's bill um for for addressing the courtell decision in a way that we think is very responsible and really doesn't detract from agrieved participants to bring a claim where they where there's genuine harm that they are aware of.
▶ 1:03:10And uh time is running down, so I'll go to Miss Dudley here uh regarding President Trump's executive order on August 7th uh about litigation risks uh that impede American workers retirement accounts from achieving competitive returns and the assets uh diversification necessary uh to secure a dignified retirement.
▶ 1:03:31What are examples that you see of threats from these lawsuits that are being brought uh by a small number of of law firms as was just stated uh against these uh defendants? What do you see that the result is on stifling innovation or making changes uh for employee benefit plans that actually don't benefit the employees?
▶ 1:03:54Absolutely. Great question. Uh again we we conducted an informal survey. Uh risk of litigation is a key a significant factor in their decision to offer new services or uh benefits. 80 almost 89% said that of defined contribution uh plan sponsors.
▶ 1:04:15Almost 29% of our plan sponsors uh that answered the survey uh say they won't do some they won't offer something new unless other people are doing it. 20 almost 25% say they will not offer have have decided not to offer more assistance because of the risk of litigation and almost 43% say they will not provide lifetime income because of the risk of of litigation. I mean it's very serious.
▶ 1:04:45Th those are serious findings. I appreciate you bringing them to us. Uh 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've earned over the years. So want to thank all of you again and I yield back to the chair.
▶ 1:05:10I thank gentleman for yielding. Now I call on Mrs. pays Connecticut for your line of questioning for 5 minutes.
▶ 1:05:16Thank 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.
▶ 1:05:39In April 2024, the Biden administration finalized a retirement security rule that would protect American workers and retirees by requiring financial adviserss to act in the best interest of their clients. This rule would have addressed a deceitful practice in which a financial adviser could steer clients toward investments that were more lucrative for the advisor but not in the best interest of the clients.
▶ 1:06:05While most financial adviserss 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 resend 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.
▶ 1:06:32Rivera, can you explain how the actions by the Department of Labor to rescend the retirement security rule would impact workers and retirees?
▶ 1:06:43Well, the retirement security rule is something that ARP certainly had supported and I think the importance of fiduciary duties can't be overstated to protecting American retirees. So just as we're discussing here today the their retirement they are bearing the risk of choosing how their money is saved and invested.
▶ 1:07:13And so 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.
▶ 1:07:30Thank you. In your testimony, you also stated that quote, "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.
▶ 1:07:51Can you tell us why any legislative attempt to overturn or narrow the holding announced in that case would directly undermine the core protections of ORISA and impose greater harm and risk to retirement And what are some actions that Congress could take to ensure that the workers retire uh with their dignity and the benefits that they've earned?
▶ 1:08:13Well, there's certainly a lot of room for improvement for the retirement uh savings of American people to be protected and and 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.
▶ 1:08:42Those 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 can't do them. There may be certain exceptions under certain circumstances based largely on information that may be solely in the possession of the uh of the fiduciaries.
▶ 1:09:08But nevertheless, it's important to make sure that the retirees savings are as strongly protected as possible.
▶ 1:09:17I think you said something very important. The individuals and for so many people, it takes a lot of trust to hand over your retirement savings to someone and you just operate with the assumption that they're working in good faith and in your best interest. And I think on this committee, we should be focused on protecting the American workers and retirees, ensuring that there's both transparency and accountability in the way these plans play out.
▶ 1:09:43Because for the average person, they wouldn't have all of this fiduciary knowledge to understand the impact, the long-term impact of all of these things. And we actually have the ability on this committee to focus on protecting the retirees who literally have saved this money to secure uh a thriving retirement. With that, I yield
▶ 1:10:06I thank gentle lady for yielding. And now uh recognize uh Representative Fine, who we've talked about quite a bit this morning, uh for your five minutes of
▶ 1:10:17Well, thank you, Mr. Chairman, and hopefully some of it's a little good. It' be a nice change. Um I 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 and featuring this issue and talking about my bill um House Bill 6084. We've all experienced this issue in our own lives. Leave Orisa out of it. Think about going through your mail on the average Saturday and you find some notice about some lawsuit that's happened that you didn't even know about. You didn't know there was an issue.
▶ 1:10:46You get a check for And if you actually read the notice, you find out that the law firm that brought this claim is going to get 5,105 million for getting you your $723. Well, it's one thing when that happens in some sort of generic part of your life, but it's another when it happens when it comes to your retirement that you are depending on to take care of you when your working years are over. And that is why this bill is so important. But let me be clear, no industry has a monopoly on jerks.
▶ 1:11:16And I actually usually use another word when I say that there are bad actors that need to be sued, but there are also plenty of bad lawyers who take advantage of the system. And 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. So I do have a few questions. I want to start with Mr. Butach.
▶ 1:11:45In your testimony, you gave an example sort of like uh the one I talked about where participants got under $20 each. That ain't going to save your retirement while lawyers took nearly a half a million dollars in fees. Gives that lawyer a pretty good retirement. Uh is that the purpose of ORISA to help lawyers retire with half million dollar fees while people get 20 bucks? And is that an outlier or typical of how these cases resolve? So that's not the purpose of ORISA.
▶ 1:12:15Um I think class action lawyers in in cases that aren't designed just to uh yield a quick settlement um you know are looking to be compensated for their efforts. Typically we do see and I don't know why the the industry has stuck on this but they typically take a third of of the recovery. So imagine if you will and and you know that the cases are legion.
▶ 1:12:41I every every week or so you can read about a settlement and it's um a recent case and it's settling at you know two or three or four million dollars and 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 uh participants in that plan. And recall too that these are fiduciary cases. The statute of limitations under Orisa is six years.
▶ 1:13:09So they're getting $50, but that's to cover the alleged wrong uh covering six years. So it really is like the example that you gave where you get your $7 check in the mail.
▶ 1:13:22And keep in mind the reason it's a third is there's no one really to negotiate. In most of these instances, the law firm is coming up with the case. They're finding a couple people who are willing to be the primary plaintiffs, but it's not as though some guy who's in the Orisa plan is hunting for a law firm to get him the 20 bucks. That's why the fees never go down. Um, Miss Dudley, you mentioned a title wave of frivolous litigation, draining resources from workers retirement accounts. In your view, how urgently is congressional action needed?
▶ 1:13:52And what risks do workers face if Congress fails to pass my bill, which is again the ORISA litigation reform HR6084?
▶ 1:14:01To me, I think it's extremely urgent. That's the right answer. I think this
▶ 1:14:06I I think this is really important and I'm so appreciative of the hearing and the opportunity to talk with everyone about this. Under under the current law based on the Supreme Court decision, the plaintiff's attorneys can go out, gather up their plaintiffs, file their claims and and file a whole lot of them at once and compel settlements very quickly because of the cost. And even just the motion to dismiss is expensive.
▶ 1:14:37And then you get to discovery and that's extremely expensive. And 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 don't contribute and they don't engage in the plan. Overall, it's very urgent.
▶ 1:14:54And I would close just by noting the cost of this is not just the money that's 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's 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 wasn't worth it to settle. This is hurting our retirees.
▶ 1:15:24We owe it to them to protect them. I appreciate the hearing and I hope we'll get my bill moving. Thank you for being here. I would I yield back.
▶ 1:15:32I thank the gentleman for yielding and now I call on my good friend Mr. Courtney for your line of questioning.
▶ 1:15:37Thank thank you Mr. Chairman. Um, 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 hadn't been following this case. But seeing a unanimous decision by the Supreme Court and also a very interesting discussion of the federal uh rules of civil procedure section 7 uh in the in the uh both the concurring opinion and and the um prevailing opinion.
▶ 1:16:05Um I I'm really struggling honestly and Miss Dudley I've worked with the benefits council a number of years have a lot of you know respect and admiration for the work that that you know they do but I honestly feel that um the reaction to this decision is way over the top and I'm not the only one. Jones Day which is a highly respected law firm here in Washington DC does a lot of uh defense work uh for uh companies in in this type of litigation.
▶ 1:16:33They published a an article after after the court decide decided its case in which it said that the US Supreme Court encourages federal rule 787 replies uh which is a way to screen out meritless complaints before discovery.
▶ 1:16:49Again, I want to be really clear here because it was both the the majority opinion and the concurring opinion by Alo that laid out the roadmap for defense council in terms of getting swiftly to a judgment on a meritless claim. Um and and and again in in accordance with the the ruling that was handed down. And you know, Mr. Rivera.
▶ 1:17:13I mean, I just want to make sure um you know, I'm not reading Jones Day's analysis wrong. I mean, the fact of the matter is is that again, they they gave a very clear somewhat not used much in the past because they didn't have to use it. Okay.
▶ 1:17:30what what the what the court is really saying to defense council is that, you know, you have to kind of hustle a little bit, you know, in terms of the pleadings to get to the place where a motion for judgment can can actually be heard. Mr. Rivera, maybe you can respond to that um opinion of of the court's decision.
▶ 1:17:52Sure. I think the court both in the unanimous decision as well as in the concurrence offer a number of different ways. The concurrence highlights the rule seven as you said to reply to an answer. But the court said there are other tools in addition to rule 7 and that rule 7 hasn't been commonly used doesn't mean it's not viable to your point hasn't needed to be used or people haven't really thought about it very much. Use it.
▶ 1:18:18Let's see what happens with that on both sides and see how that process plays out. But the court acknowledged you have the opportunity to have a reply, make sure there's standing question. If there's a question of the parties standing to sue, there are sanctions for bad faith cases, truly frivolous cases.
▶ 1:18:38There are real 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 of case management that enables frivolous suits to be
▶ 1:19:01Well, thank you for again just [clears throat] sort of reminding us that the court just didn't sort of throw the doors open to Lionel Huts from the Simpsons to come rushing into court and and and try and you know get judgments um you know that are undeserved. I mean the fact of the matter is they left they laid out a responsible legal process for a swift judgment on meritless claims. U Mr.
▶ 1:19:23Chairman, I would ask that again the Jones Day analysis of this decision which again describes as a potential boon for defense council in terms of getting the desired result which we've we've been listening to um in this hearing this morning
▶ 1:19:38without objection
▶ 1:19:40and you know again if if if we override this and again believe me there's a lot of Supreme Court cases I'd love for us to be holding hearings on in terms of um having Congress you take action. Citizens United is obviously right there at the top of the list, which damage it's done to our elections and political process. But the fact is is that we've got a case that is literally the ink is barely dry on this decision. I mean, it was last spring that it was handed down.
▶ 1:20:10There clearly is disagreement, legal disagreement about whether or not the the witness's position today is that it's, you know, going to create this crisis or whether or not it's actually going to actually help the system weed out meritless claims. And I think again we are rushing ahead with a legislation on an issue that is far from a crisis. I yield back.
▶ 1:20:31Thank the gentleman for yielding. Now I call on our esteemed chairman emeritus of this great committee, Mrs. Fox from North Carolina for her five minutes of
▶ 1:20:42Thank you, Mr. Chairman. I appreciate this and I appreciate you're holding this important hearing. Mr. Celique Ramen, in your testimony, you give examples that border on outright harassment, including plaintiffs council suing a defendant's infant grandchild and serving process on the baby's home.
▶ 1:21:03What does 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? And what message does that send to employers who are trying to provide voluntary benefits in good faith?
▶ 1:21:26Well, certainly it's an example of the the non-monetary burdens that defendants in these cases who are who are people, individuals um uh face. Uh and so that was more one of the more egregious examples, but certainly there are any number of examples of discovery abuses um including, you know, naming as many defendants as possible to increase the financial burdens on plan sponsors to ratchet up settlement pressure.
▶ 1:21:51uh as well as just you know the volumes and volumes of discovery that can be issued that can ratchet up leg legal fees. Um so it's it's a real it's a real burden and it's done intentionally by the plaintiff's bar again to to uh to extract those uh cost of defense uh
▶ 1:22:07Well, I want to follow up a little bit on that. As you know, ORISA 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 No, they they would not undermine those protections. In fact, I think they would enhance them.
▶ 1:22:36Um the the concern is that meritless, frivolous lawsuits, if allowed to continue, and it's it's not just starting with Cunningham, this has been years of them. Uh if allowed to continue, will impact uh plan sponsor and fiduciary behaviors. Um plan sponsors could decide that it's not worth it to offer benefits anymore or or they may offer less lucrative benefits uh given the cost of defending these lawsuits. Um or they may change their behavior.
▶ 1:23:03They may think uh I would like to engage a particular service provider who I think would be best suited for my particular plan, but they're not the absolute cheapest and that makes me nervous uh that I might get sued. Um and so maybe, you know, there's there's an incentive to make a fiduciary choice that the fiduciary doesn't believe is actually in its participants best interests. Um so I think that by eliminating these frivolous lawsuits, you're you're actually enhancing protections for American workers.
▶ 1:23:31Thank you. And again, I I want to get some amplification on on what you just said from Mr. Bhes. 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. Um, as Mr.
▶ 1:23:53Sali Kraman 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?"
▶ 1:24:09So Orisa can I believe and does recognize that when a fiduciary is making a decision there there are a range of reasonable options a range of reasonable decisions that that fiduciary can make.
▶ 1:24:23Unfortunately, with the the pleading standard the way it is, despite efforts with Supreme Court cases, the Dudenhaer case, the Northwestern case, we're still getting these cases where the the pleading standard is exceedingly low and that is causing um this added added cost that that is um disruptive to retirement plans in the United States.
▶ 1:24:50Thank you very much, Mrs. Dudley, predatory lawsuits contain baseless accusations. How do these accusations undermine employee confidence in the benefits provided by an employer?
▶ 1:25:04They they um do undermine that. That's a good question, too. Um they do undermine the confidence of the employee because they erode trust. A lot of times these settlements, and that's really what's happening here with the frivolous lawsuits, is they're trying to drive to a settlement. And settlements maybe look like somebody did something wrong. Even if what the company was trying to do was settle it so that it didn't continue to drain resources.
▶ 1:25:34Remember those resources are not just the time and the commitment from the HR and the benefit staff, but it's also paid for out of the budget and reduces the the future compensation and benevs. And so it looks like somebody did something wrong when in fact they didn't. They were just trying to be practical and it causes employees not to engage in the plan.
▶ 1:26:01Thank you very much. And thank you, Mr. Chairman, again I appreciate our witnesses. I yield back.
▶ 1:26:07Jenny general lady yields. And now call on Mrs. Lee from Pennsylvania for your line of questions for five minutes.
▶ 1:26:13Thank 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. And here we are again with a a hearing, another hearing about how to further undermine workers by limiting their ability to make claim to the retirement uh benefits that they are legally entitled to.
▶ 1:26:41My Republican colleagues have referred to workers Orisa lawsuits as frivolous. But with an administration that has shown complete disregard for worker protections, from undercutting the Employee Benefits uh 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?
▶ 1:27:12With an administration that issued an executive order to facilitate 401k investments in private equity and it's hard to believe that workers might be facing real issues with their retirement funds caught up in risky investment options. I don't think it is. It's the very people waging the attacks on workers who are alleging that workers are complaining too much about being attacked.
▶ 1:27:38and they would have us believe that it's the volume of the complaints that we need to address, not the fundamental attacks that they're facing. Despite the fact that the volume isn't even high with about 100 class action lawsuits a year for over 800,000 Orisa 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.
▶ 1:28:06Instead, the focus is solely on the alleged harm being done to big corporations, the health insurance companies, and corporate defense attorneys. Mr. uh Rivera, in your experience with Orisa lawsuits, are the corporations being sued suffering more than the workers and senior citizens who are suing them?
▶ 1:28:25No. Clearly, we're 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.
▶ 1:28:46They 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.
▶ 1:29:04Yes. So uh when the class action lawsuit uh has been successful, what has it meant for the workers and the senior citizens who are part of the suits? 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.
▶ 1:29:29all of the things that have helped to make the process better and safer for retirees and savers.
▶ 1:29:37Thank you. So, the real story here is that when workers and senior citizens experience very real harms to their retirement savings, the ability to exercise their legal rights can be the difference between retirement security or financial ruin. But 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 Orisa. Mr.
▶ 1:30:07Rivera, should the folks who ARP 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? Well, it's 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
▶ 1:30:38are well protected and that they can have as much trust in their fiduciaries as possible. So maybe [laughter] I appreciate that uh and I appreciate uh your your your testimony. Republicans already passed the largest cuts to SNAP to Medicaid in history and now it's clear that they want to go after folks retirement benefits too and that is a that is a deep concern.
▶ 1:31:00We all have senior citizens on our lives and one day we too will be retiring and we want to know that we can do that with dignity uh and we can do it without financial ruin. Americans work a lifetime to earn the right to retire with that and uh we must do everything in our power to protect it. So I thank you all so much and I yield back.
▶ 1:31:19I thank the general [clears throat] lady for yielding. Now I call on my friend the ranking member of this committee uh representative Scott for his line five minutes of questioning.
▶ 1:31:30Thank you Mr. Chairman and I yield 30 seconds to the gentle lady from Georgia.
▶ 1:31:36Thank 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.
▶ 1:31:51So, I wanted to clarify that I believe that this was just a difference of opinion between us on this issue that doesn't rise to a point of order and 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.
▶ 1:32:10Reclaiming my time, the Miss Dudley mentioned that 89% consider being of the participants consider being sued uh as they make their decisions. Apparently, it's worked because according to the statistics that the ranking member cited, 99% of the plans in fact did not get sued between 2020 and 2024. So, this hearing is about the one out of a thousand that I guess did get sued.
▶ 1:32:41Uh, Mr. Riviera, we heard a lot about these copycat lawsuits. I remember when I was practicing law, if I filed a divorce 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?
▶ 1:33:06I 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 Orisa that one is challenging.
▶ 1:33:16Thank you. And Corningham v. Cornell found that um claim of um exemption was an affirmative defense. Is there anything in the federal rules of civil procedure regarding affirmative defenses that is peculiar to Orisa cases that wouldn't apply to just about every other
▶ 1:33:37Um we've heard about lawyers getting getting paid. In fact, we heard from the gentleman from Florida that um participants got 20 bucks and the lawyers got half a million. raises the question, well would the 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.
▶ 1:34:07Um obviously the only way you can stop the misconduct is these lawsuits. So, I guess my question is, should the plan [snorts] pay the legal fees or the guilty fiduciaries uh who've been profiting from their misdeeds pay the legal fees?
▶ 1:34:27Well, it certainly sounds like it should be the ones who did something wrong.
▶ 1:34:31Okay. Well, um Mr. Bach and Mr. Dudley, can you name specific examples of um lawsuits that were in fact frivolous that were brought against some of your member organizations?
▶ 1:34:49Well, I I I don't think today I would name names and name uh specific lawsuits. I do know that um there have been just a whole uh range of copycat lawsuits. Uh, and I'll be happy to come back to you with more specifics on these, but
▶ 1:35:08Okay. If you're not going to name Mr. Bash, do you want to can you come up with examples of um cases that are frivolous and maybe even some against your members that were meritorious?
▶ 1:35:20Um, I don't have that information for you. I will say though, Orisa reflects a careful balancing and participants do need the right to get the benefits that have promised to them. But also, we shouldn't have a system that's so complex or so costly that it discourages employers from creating and maintaining employee benefit plans in the first place. It's a voluntary
▶ 1:35:50Well, thank you, uh, Mr. Riviera, can you cite examples of meritorious cases that have been brought that have stopped um abuse?
▶ 1:36:02So, there are a lot of cases that have settled, right? And in most of those cases, well, all those cases, no one admits any wrongdoing. But 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 And excuse me if I could just add and finish my sentence.
▶ 1:36:30There is um a good example in out of the second circuit where the the court had to revive a case based on the Cornell decision even though they had dismissed it be as baseless. So it is happening. There are lots of 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.
▶ 1:37:00Thank you, Mr. Chairman. I yield back.
▶ 1:37:03All right, the gentleman yields back and all right it looks like we're finished up here and I'll call on our ranking member
▶ 1:37:33my friend uh Mr. Sier for your closing
▶ 1:37:37Thank you Mr. chairman and again as we often talk in our relationship here more [clears throat] than happy to engage in a discussion about making the system more efficient and making sure that uh Americans retirements are protected. In 1989, if my number is right here, um just a second.
▶ 1:38:03In 1989, almost half of Americans were to defined benefit plan. As we've moved away from that to more creative solutions, we have more pressure. That's why people are working longer and there's more pressure on people in addition to the fact that the cost of things continue to go up. So squeeze is harder and harder. So I'm happy to work with you as two people who've met in our other careers uh thousands of payrollles and contributions um to make the system more efficient.
▶ 1:38:34So Americans, workers and retirees are facing a crisis thanks to the current my perspect perspective administration's economic policies policies. The cost of living as I as I've said continues to rise. The job market has slowed, financial markets are suffering, and worker protections have been stripped away.
▶ 1:38:54Today's hearings and subcommittee's agenda this 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 tip the scales against workers in favor of bad actors. not all employers, but the most egregious ones. The bills do nothing to support EPSA's key mission at a time when it is understaffed and underresourced.
▶ 1:39:24And today's hearings unfortunately shows that my committee colleagues do not want to stop there. Even though the facts show that the volume of Orisa class action litigation is incredibly small compared to the total number of retirement plans. Again, be happy to work with the witnesses and my colleagues to eliminate the but overall we've have to be more aggressive to protect American workers retirement plans efficiently.
▶ 1:39:53We should be working together to strengthen and expand Orisa's protections and not undermine them. I thank the witnesses and yield back.
▶ 1:40:02I thank the gentleman for yielding and uh now I'll recognize myself uh for closing statement. I want to thank our witnesses again for uh your expert Um frivolous lawsuits impose serious financial and reputational cost on and I stand by that statement. Ultimately, these lawsuits suck up time and resources that should be spent uh helping Americans uh save.
▶ 1:40:32Some class action lawyers have spawned a litigation racket, exploiting ORISA to extract massive settlements without merit. Meanwhile, employees, employers, and retirees all lose out as legal fees sore, resources are drained, and their op optimal investment risk or at, you know, at risk.
▶ 1:40:56Uh, Orisa was designed to protect retirement savings, not to bankroll a business model for opportunist opportunistic lawyers. HR684, the ORISA litigation reform act, which we discussed today, protects the retirement system from predatory lawsuits that are bleeding employers and feeding on on benefits meant for employees. And uh, Mr. Sonia, I'll be happy to work with you uh, on that legislation.
▶ 1:41:26uh so that we can uh solve this problem and move on to the myriad of other issues that are facing the American people. Um I would again like to thank all of our witnesses and uh that testified before the committee and without objection there being no further business the subcommittee stands