June 27, 2022

Volume XII, Number 178


June 27, 2022

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Arbitration under ERISA: A Roadmap for Enforcement

As costly class action retirement plan litigation under the Employee Retirement Income Security Act (ERISA) proliferates, mandatory individual arbitration has become an increasingly appealing alternative for certain benefit plans. However, the benefits of arbitration can only be realized if it is enforceable.

The chart below highlights the most common reasons courts have refused to enforce mandatory individual arbitration in ERISA plans and offers potential solutions for overcoming these judicial obstacles:

Reasons for Not Enforcing Arbitration

Ways to Address

With respect to claims brought on behalf of the plan (e.g., fiduciary breach), the plan has not agreed to arbitration.

Include the arbitration provision in the plan document and reference the provision in the trust agreement if possible.

Participants received no consideration.

Include the arbitration provision in the plan as early as possible.

Specify that further benefits are conditioned on arbitration.

Make the arbitration provision expressly mutual.

Participants have not agreed to arbitration.

Include a requirement to arbitrate plan claims in employment, severance, or other agreements, although this may not be binding on the plan.

Participants did not receive notice of the arbitration requirement.

Ensure the arbitration provision is conspicuously included in the summary plan description or a summary of material modifications and is provided to all participants as early as possible.

Consider other overt methods of providing notice of the arbitration provision.

Claims are not included in the scope of the arbitration provision.

Ensure the arbitration provision broadly defines the parties and types of claims subject to the arbitration.

Individual arbitration of fiduciary breach claims violates purposes of ERISA.

Ensure the arbitrator can award all remedies under ERISA, including the removal of the trustee.

Make arbitration provisions as participant friendly as possible (e.g., pay for expenses, offer telephonic hearing, make venue convenient).

© 2022 Bradley Arant Boult Cummings LLPNational Law Review, Volume XII, Number 46

About this Author

B. David Joffe Employment Attorney Bradley Nashville

David Joffe practices primarily in the areas of employee benefits and executive compensation law. He is the chair of the Employee Benefits and Executive Compensation Practice Group.

Retirement Plans: David advises clients on the design, implementation and administration of qualified and nonqualified benefit plans. He consults with plan sponsors, administrators and fiduciaries of private, governmental, multiemployer and church plans. David has experience with a variety of benefit plan arrangements, including traditional defined...

Caleb L. Barron Employment Attorney Bradley Nashville

Caleb Barron provides advice on a broad range of employee benefits and executive compensation matters for privately and publicly held companies, churches, universities and governmental entities. He prepares governing documents for retirement, deferred compensation and welfare plans, including 401(k) plans, 403(b) plans, 457 plans, defined benefit plans, employee stock ownership plans (ESOPs), bonus plans, incentive plans, medical plans, cafeteria plans and wrap plans. Caleb advises clients in the preparation and delivery of participant communications and disclosures...