Washington, D.C., November 19, 2024 – The ERISA Industry Committee (ERIC) recently filed amicus briefs in two separate cases affecting large employers. The first case represents a challenge to the practice of “pension risk transfer.” This is a growing area of class action litigation where the trial bar attacks routine transactions that are part of plan administration for pension plans governed under the Employee Retirement Income Security Act of 1974 (ERISA). The second case involves an Illinois statute requiring staffing agencies to pay temporary employees who work at a particular site for more than 90 days within a year either “equivalent benefits” as the lowest paid, comparable employee or the hourly cash equivalent. The case has the potential to set a precedent for how courts apply ERISA’s express preemption provision.
An overview of each case is below along with comments by Tom Christina, Executive Director of the ERIC Legal Center. Links to each case can be found at the conclusion of the overview.
Bueno v. GE
Bueno v. General Electric is a putative class action brought by former GE employees challenging a transaction in which a defined benefit pension plan maintained by GE purchased annuity contracts from an insurance company by transferring assets to the insurer, which agreed to be liable for payment of the former employees’ pension benefits. Plaintiffs alleged that this “pension risk transfer” transaction breached ERISA’s fiduciary duties because the insurance company chosen for the transaction was not the “safest” annuity provider. ERIC filed an amicus brief in the U.S. District Court of the Northern District of New York (“the court”) supporting GE’s motion to dismiss the Plaintiffs’ complaint. In their amicus brief, ERIC urged the court to dismiss the case, explaining that the Plaintiffs lack standing to sue because they failed to allege an actual injury to their legal interests stemming from the transaction and because they failed to allege any viable claim for relief.
“The Plaintiffs’ bar has come up with some very fanciful theories in an effort to justify ERISA class actions that provide them with a steady stream of legal fees. Bueno is another chapter in that on-going story,” said Tom Christina, Executive Director of the ERIC Legal Center. “Like the 401(k) fee class actions that came before them, if these pension risk transfer claims progress beyond the pleading stage, employers and the courts alike will be bogged down in costly and time-consuming litigation. For large employers voluntarily offering defined benefit plans, managing another litigation threat means diverting resources to legal fees instead of reinvesting in their business and workforce. The court has a significant opportunity to stop abuses by the Plaintiffs’ bar by dismissing this case.”
Seyfarth Shaw LLP prepared the amicus brief, which is available here.
Staffing Services Association of Illinois v. Jane R. Flanagan
Staffing Services Association of Illinois v. Flanagan is a challenge to an Illinois law that requires staffing agencies to provide specific benefits at specified levels to certain staffing agency employees when they are assigned to perform services for client companies for 90 or more days per year. When the statute applies, it requires a staffing agency to provide the same benefits to its employees that the client employer provides to its own employees in comparable positions. The Plaintiff Association alleges that the statute is preempted by ERISA and has asked the U.S. District Court for the Northern District of Illinois (“the court”) to issue a preliminary injunction preventing Illinois from enforcing the statute until the lawsuit is resolved. A broad coalition of organizations concerned with enforcing ERISA preemption–including ERIC–filed an amicus brief urging the court to grant the Association’s motion for a preliminary injunction.
“The fundamental premise of ERISA is that employers are not required to establish or maintain employee benefit plans. ERISA gives employers the right to design and offer benefits that meet the needs of their workforces and allows for uniformity and predictability in how those plans are administered. The system created by ERISA depends entirely on the voluntary adoption of those plans. The Act encourages employers to adopt employee benefit plans by guaranteeing that employers are not required to comply with a patchwork of state and local laws in administering those plans,” said Tom Christina, Executive Director of the ERIC Legal Center. “This case could have far-reaching consequences on private employers nationwide, not just staffing agencies and their clients, and affect a broad swath of employer-provided benefits, including health and retirement plans. That is why we have urged the court to rule that the Association has shown a likelihood of success on the merits of its preemption claim, justifying a preliminary injunction.”
Miller & Chevalier prepared the amicus brief, which is available here.
