Compliance Calendar
The ERISA fiduciary lawsuits of the last decade have a health plan sequel. Employees are now suing their employers as plan fiduciaries over drug pricing, fees and surcharges. Most early cases have been dismissed, but the lessons are about process, and process is something you can do this quarter.
Key takeaways
- Employers sponsoring health plans are ERISA fiduciaries. Plaintiffs are now alleging they failed to monitor pharmacy benefit manager contracts, fees and surcharges.
- Early cases against large employers have been dismissed, mostly for lack of standing, and one is on appeal. Tobacco surcharge suits are more numerous, and courts have split.
- A paper trail of a prudent process, meaning benchmarking, committee minutes and fee reviews, is the best defense and it costs little.
Why this is happening
Under ERISA, whoever has discretion over plan management or assets is a fiduciary, which includes the employer that picks the carrier, administrator or pharmacy benefit manager. Fiduciaries must act prudently and solely in participants’ interest, and must monitor the service providers they hire. After years of fiduciary lawsuits over plan fees, plaintiffs’ lawyers are applying the same theory to health plans: that a plan paid too much for drugs or services because the employer did not shop or negotiate.
Two federal disclosure laws feed this. The Consolidated Appropriations Act of 2021 requires brokers and consultants to disclose their compensation to plan fiduciaries. In January 2026 the Department of Labor proposed a rule requiring pharmacy benefit managers to disclose their fees to self-insured plans. That rule is still proposed. Disclosure is what gives a plaintiff, and a fiduciary, something to measure against.
What the courts have done so far
Suits against several large employers over pharmacy costs have been filed since 2023. The ones we have seen reported have been dismissed because the plaintiffs could not show they were personally harmed. One was dismissed twice, most recently in late 2025, and an appeal is pending in the Third Circuit as of this summer. We have not found a decision on the merits.
Tobacco surcharge suits are a different story. More than 50 are pending. Plaintiffs allege that employers charged tobacco users a surcharge without giving the required reasonable alternative or notice. Several courts dismissed such cases in early 2026, reasoning in part that setting premium incentives is a design decision for the employer. Others have survived dismissal. A federal guidance document issued in August 2026 says enforcement agencies will not penalize plans that provide the reward prospectively, but it does not bind courts. See our article on tobacco surcharge suits.
The record that protects you
Fiduciary cases turn on process, not outcomes. A plan sponsor that can show a thoughtful, repeated process is in a much stronger position. Keep these in a file you can hand to counsel.
- A written fiduciary committee charter naming who decides what
- Meeting minutes at least annually recording what was reviewed and why decisions were made
- A benchmark or market check of carrier, administrator and PBM pricing at a defined interval
- The fee and compensation disclosures from your broker and each vendor, and your review of them
- For pharmacy: whether rebates are passed through, who keeps spread, and an audit of the contract
- Plan documents and summaries that match how the plan is actually run, including wellness and surcharge language
Questions we get
Does a fully insured employer face this risk?
Less, because the carrier makes the pricing decisions. You are still a fiduciary for choosing and monitoring the carrier, and surcharge and eligibility issues apply to everyone.
Is hiring a broker a defense?
A broker can help you meet your duty, but the duty stays with the employer. Document your own review.
What is the first step?
Name a committee, even a small one, put the review dates on a calendar, and hold the first meeting. We can supply the agenda.
Sources: ERISA fiduciary provisions; reporting on federal court decisions through October 2026; Consolidated Appropriations Act, 2021; Department of Labor proposed PBM fee disclosure rule (January 2026). This is general information and not legal advice; consult ERISA counsel.
Related Reading
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