How Much are ERISA Attorney Fees and Who Pays Them?
Aside from wages and earnings in general, retirement benefits represent a sizable portion of one’s compensation.
After all, these benefits are designed to allow us to retire one day while still bringing in enough money to live—ideally, to live comfortably.
To help ensure that all American workers are able to retire, Congress passed the Employment Retirement Income Security Act of 1974, often referred to as ERISA.
ERISA achieves this end by setting standards that all retirement plans managed by a third party must follow. If a fiduciary does not follow the relevant rules, retirees and other beneficiaries can hold them liable for damages.
As with any litigation, ERISA attorney fees are something that most ERISA claimants worry about. Thus, who pays ERISA lawyer fees is often an inevitable legal question in many ERISA claims.
What Are Fiduciary Duties Under ERISA?
By definition, a fiduciary is an entity or person who takes or is given the responsibility and authority on someone else’s behalf or for their benefit. Fiduciaries may include a number of different potential parties, such as financial advisors, attorneys, and 401k plan managers.
As noted, fiduciaries have a number of responsibilities and obligations toward plan beneficiaries under ERISA. The primary responsibility of a fiduciary is to act for the benefit and at the direction of a planholder. To this end, fiduciaries must avoid conflicts of interest with respect to their planholders.
For example, a conflict of interest might arise if a fiduciary stands to benefit personally from purchasing a given asset on behalf of their planholders. The Golden Rule for fiduciaries is to place their clients’ priorities above their own.
What Is a Fiduciary Breach?
There are a number of ways that a fiduciary can breach their duties under ERISA. As noted above, all it takes is for a fiduciary to place their own interests above those of a client.
To illustrate, let’s assume that the fiduciary in question has a financial stake in the success of an index fund. They are paid by the index fund’s owners for every share that they can sell. This may not look like it poses too much of a problem yet, but now let’s consider that the index fund isn’t doing so well.
Other similar index funds are outperforming it quarterly, but the fiduciary in question still uses their position to purchase shares of the index fund for their clients. T
he fiduciary in this case is clearly placing their own interests above their clients, and the two interests are in direct conflict with one another. Other breaches of fiduciary duty might involve something as direct as the theft or embezzlement of a client’s funds.
There is no one way for a fiduciary to breach their duties outlined in ERISA.
Who Can File an ERISA Claim?
Anybody who has a third party acting for their benefit or on their behalf can file a claim for a breach of fiduciary duties.
Under ERISA, however, there are only four classes of people who can file a claim: plan beneficiaries, plan participants, the US Secretary of Labor, and retirement plan fiduciaries.
For the purposes of this piece, however, the two most important classes are plan beneficiaries and plan participants. A plan participant is someone directly participating in the plan (for example, by earning the wages that are put into the plan). A plan beneficiary is the person whom the plan is designated to benefit.
A plan beneficiary and plan participant are often the same person, but plan participants can designate others as their plan’s beneficiary. Someone whose spouse passes away, for example, is a beneficiary of their spouse’s retirement plan, but not necessarily a participant.
When Can You File an ERISA Claim?
The legal requirements for suing for damages in an ERISA claim mirror those found in typical civil tort cases. For a successful claim, a plaintiff must demonstrate four things:
- The plaintiff must show the existence of a fiduciary relationship between themselves and the defendant;
- The plaintiff must demonstrate that a breach of fiduciary duty occurred in this specific instance;
- The plaintiff must demonstrate that they have suffered real damages; and
- The plaintiff must demonstrate that the breach of the duty in question was the cause of the damages they suffered.
A successful claim will require a plaintiff to demonstrate all four of these components in court.
Finally, anyone filing a claim under ERISA must do so within the statute of limitations period. After the statute of limitations lapses, a claimant cannot file a lawsuit. The statute of limitations for breach of fiduciary duty ERISA claims is either:
- Within six years of the date on which the fiduciary breach occurred; or
- Within three years of the date on which the plaintiff had actual knowledge of the breach.
According to ERISA, whichever time is lesser is the one that applies as the statute of limitations.
Who Pays for Attorney Fees?
Typically, whoever hires an attorney pays for their own legal fees. ERISA, however, can shift this responsibility in some instances. ERISA regulations give federal judges the authority to award “reasonable attorney fees” to either party in an ERISA dispute at their discretion.
The US Supreme Court has explained that a person does not have to be a “prevailing party” to obtain attorney fees under ERISA. Instead, a court can award attorney fees, at its discretion, to a party that achieves “some degree of sucess on the merits.”
Several factors may indicate that a party’s claim has some degree of success on the merits, including:
- Winning a claim for summary judgment;
- Having a claim sent back to an insurer for a second review;
- Having an insurance company drop a claim they filed against someone; and
- Having an insurance company drop their defense of a claim and paying out benefits voluntarily.
However, these are not the only ways to show some degree of success on the merits. There are a number of factors your ERISA attorney may rely on to argue for the court to award you attorney fees on your claim.
If You Need Help with an ERISA Claim
ERISA claims are complicated, so it is imperative that you hire an experienced attorney to file your ERISA claim.
Seeking attorney fees in ERISA claims can lead to a number of complex issues: liens on ERISA attorney fees, subrogation of ERISA attorney fees, and denial of attorney fees are all questions that demand the attention of an attorney with ERISA experience.
The attorneys at Peace Law Firm know how to navigate the complex legal world of federal judges, insurers, and fiduciaries and are here to help you however you need. Contact us today for a free consultation to get started on your ERISA claim!