Are 401k Class Action Lawsuits Dead?

But the Fourth Circuit’s decision to vacate the District Court’s grant of class action status to those plaintiffs has roiled the ERISA bar. The Fourth Circuit’s decision in Trauernicht v. Genworth Financial Inc., if it survives appeal, could spell the end of ERISA 401k class action lawsuits.

Without the option to pursue breach of ERISA fiduciary duty lawsuits as a class, plan participants may be left without any realistic remedy. Plan sponsors, who have long argued that these 401k fiduciary breach lawsuits are excessive, may finally achieve goal #1 at the top of their wish list. 

Imprudent investments

Peter Trauernicht and Zachary Wright, two former employees of Genworth, brought this lawsuit on their own behalf and on behalf of a class of all others similarly situated. They argue that the company, as the sponsor of their defined contribution retirement plan, selected and retained imprudent investment opportunities — namely, the BlackRock LifePath Index Funds.

Trauernicht alleges that the firm’s retirement plan committee breached its fiduciary duty under ERISA sections 409(a) and 502 (a)(2) by defaulting participants into the BlackRock LifePath Index Funds and leaving them there, rather than shopping for and choosing different funds. The plaintiffs seek to recover monetary losses occasioned by this unwise decision.

But the substantive question about whether the BlackRock funds were a good or bad choice pales in importance before the procedural issue of whether the plaintiffs can sue as a group. 

The plaintiffs sought class action status for anyone enrolled in the 401k plan. In August 2024, the District Court certified class action status but only for those invested in the BlackRock funds. Still, that amounted to roughly 95 percent of the plan participants.

 
Class action basics

Under Rule 23(a) of the Federal Rules of Civil Procedure, federal lawsuits may proceed as class actions only if certain requirements are met. Among these is the rule that there must be questions of law or fact common to the class, (known as the “commonality requirement”). In other words, all the plaintiffs must claim to have suffered the same injury.

The Fourth Circuit’s reasoning

The Fourth Circuit focused on the fact that the Genworth plan, like most 401(k) plans, is designed to offer individual participant accounts. Further, the court noted that:

“many persons included in the class suffered no injury, as they fared better for having made their investments in the BlackRock LifePath Index Funds than they would have had they invested in an appropriate substitute fund.”

It concluded that the plaintiffs could not join together in a single class, even as that class had been trimmed by the District Court, because they had no opportunity to opt out.

Swift fallout

In June 2025, participants in the National Rural Electric Cooperatives Association 401(k) Pension Plan (NRECA plan) filed a class action ERISA lawsuit claiming that the fiduciaries of the NRECA plan violated their fiduciary duties under ERISA by failing to prudently monitor and control the administrative costs and diverting excess fees to pay other plan expenses. So far, this should look familiar.

Significantly, though, in May 2026, the U.S. Chamber of Commerce and the American Benefits Council filed a joint amicus brief asking the Fourth Circuit to set aside the ERISA class certification granted by the trial court. The brief cites the same District Court’s March decision in Trauernicht. This builds and bolsters the precedent.

And business groups are moving fast to cement their win.

Now what?

As a matter of brute economics, class action lawsuits are an important tool for ERISA 401(k) plaintiffs. Much the same is true for plaintiffs in product liability personal injury lawsuits or employees who sue over unfair labor practices.

In these kinds of cases, the amount of an individual’s potential recovery is often not sufficient to sustain a complicated, prolonged lawsuit. Individuals can get priced out of court, regardless of the merits of their arguments.

On the other hand, groups of similarly situated people who have suffered very similar harms can prevail. It’s the power of collective action.

Legal rules that limit the ability of employees or retirement savers to act together as a group bear close watching. These limits are something corporate interests have sought for a long time.