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, to help ensure that all American workers are able to retire.
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?
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 several 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
The 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 success 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.
How Much Do ERISA Attorneys Charge?
ERISA attorney fees vary based on factors like the complexity of the case and the attorney’s experience. On average, ERISA attorneys charge between $350 to $750 per hour. For more complex litigation, total fees could range from $10,000 to over $100,000. This makes it essential to discuss fee structures with your attorney upfront, as some work on a contingency basis, meaning they only get paid if you win your case.
Frequently Asked Questions
Can I Recover Attorney Fees If I Win My ERISA Case?
Under ERISA, courts have the authority to award attorney fees to the party that achieves some degree of success. You don’t need to completely win the case to be eligible for these fees. Examples include a favorable summary judgment or having a claim returned to an insurer for further review.
Does the Losing Party Always Pay Attorney Fees?
No. ERISA allows courts to exercise discretion when awarding attorney fees, meaning the losing party doesn’t automatically have to pay. When making this decision, the court looks at factors like the degree of success and fairness.
What Types of Retirement Plans Are Covered By ERISA?
ERISA covers a wide range of retirement plans, including:
- 401(k) plans,
- Defined benefit pension plans, and
- Profit-sharing plans.
It also regulates certain health and welfare benefit plans employers offer, such as disability and health insurance. However, ERISA does not apply to government-sponsored plans, church plans, or certain other exempt organizations.
Are There Penalties for Fiduciaries Who Breach Their Duties?
Yes. Fiduciaries who breach their duties under ERISA can face significant penalties. In addition to being personally liable for losses suffered by plan participants, fiduciaries may also be subject to fines imposed by the Department of Labor. In extreme cases involving fraud or criminal behavior, fiduciaries could even face imprisonment.
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!
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