Benefits Monthly Minute
The April Monthly Minute showers readers with some eye-opening case law updates, ranging from a $38.8M jury verdict in a 401(k) fee case, to a pair of cases involving Elevance (f/k/a Anthem) health plan coverage exclusions.
When it Rains it Pours: $38.8M Jury Verdict in 401(k) Fee Case
After several years of litigation, on April 23, 2025, a unanimous jury handed class action plaintiffs in Khan et a. v. Board of Directors of Pentegra Defined Contribution Plan et al., a big win in their 401(k) fee case. The lawsuit, originally filed in 2020 in New York, claimed defendants engaged in self-dealing and charged excessive fees with respect to a multiple employer plan (MEP) -- one of the largest of all defined contribution plans in the United States based on plan assets -- that it administered for nearly 250 participating employers. The lawsuit class, covering more than 26,000 people, alleged that defendants breached their fiduciary duties in connection with the plan’s recordkeeping, administrative and investment management fees. Plaintiffs secured an initial win in 2023 when SDNY District Judge Philip Halpern ruled in favor of plaintiff’s jury demand. Although ERISA does not provide for a jury trial (it also does not preclude it), most courts have held there is no right to a jury trial, whether the cause or action is for benefits due, breach of fiduciary duty, or otherwise. However, Judge Halpern’s ruling is not out of sync with other Second Circuit cases that have allowed jury trials to proceed in ERISA litigation. In this case, the jury ultimately awarded damages to class plaintiffs the amount of $38,760,232.
KMK Comment: Notwithstanding the fact that Pentegra self-identifies as one of the largest MEP providers in the nation, this enormous damages award still comes as a shock. This case will be scrutinized by plaintiff attorneys looking for a direct route to a jury trial in ERISA fee litigation. While all signs points to New York in terms of forum shopping, courts outside of the Second Circuit may also view this case as somewhat persuasive. Plan fiduciaries should review the case with counsel and proceed with a heightened awareness of fiduciary duties that pertain to approval and monitoring of 401(k) plan recordkeeping, investment and administrative fees.
Anthem Settles NY Mental Health Class Action
In Collins v. Anthem, plaintiffs claimed Anthem’s use of certain clinical coverage criteria to determine whether residential treatment of mental health conditions is medically necessary violated mental health parity laws. The Anthem-administered plans at issue linked the definition of medical necessity to services that are consistent with generally accepted standards of medical practice. However, plaintiffs claimed that Anthem devised medical necessity criteria for evaluating residential mental health treatment that were actually more restrictive than generally accepted standards, including by: 1. improperly heightening the relevance of acute behavioral health symptoms while minimizing the relevance of non-acute behavioral health symptoms and conditions, 2. limiting coverage for residential mental health treatment to a short term, and 3. conditioning residential treatment on weekly evaluations by clinical providers with prescriptive authority, irrespective of whether patients’ mental health conditions were amenable to treatment with medications. As a result of Anthem’s allegedly flawed criteria, plaintiffs claimed they were forced to shoulder increased out-of-pocket costs for residential treatment of a variety of mental health disorders.
KMK Comment: This case echoes a central tenant of mental health parity legislation, that a plan may not provide mental health and substance use disorder benefits in a manner that is more restrictive than its provision of medical and surgical benefits. Despite the seeming simplicity of this premise, mental health parity analysis and compliance can be deceptively difficult, as evidenced by the five years it has taken for the parties to sign off on a joint status report settling the class action lawsuit for an as-yet undisclosed amount.
Health Plan Exclusion of Weight Loss Medication Not Discriminatory
Elevance (f/k/a Anthem) secured a win in Maine district court earlier this month. In the putative class action, plaintiff disputed Elevance’s plan design and administration as discriminating against disabled individuals with respect to its weight loss drug exclusion. In ruling on Elevance’s motion to dismiss, the court ruled that plaintiffs’ allegations that she and other participants with an obesity diagnosis coupled with a weight loss medicine prescription are disabled were conclusory and conjectural. To state a claim, the law requires a factual basis to conclude that the plan’s weight loss medication exclusion denied the desired coverage benefit solely by reason of the individual’s disability. In this case, the plan demonstrated “evenhanded treatment” of those interested in weight loss medications – whether overweight, obese, disabled, or not disabled – the exclusion operated the same way. Thus, the exclusion did not turn on disability status. Furthermore, the court pointed out that employers could chose a different Elevance plan design that included such drug coverage. And, lastly, the complaint did not sufficiently allege that Elevance regarded plaintiff as disabled.
KMK Comment: This case was decided on the heels of a sister case, Whittemore v. Cigna Health and Life Insurance Company (Feb. 12, 2025), which was similarly dismissed by the same court, so it likely came as no surprise to the litigants. Given the recent upsurge in the popularity of weight loss medications, along with their significant cost, these cases provide a useful framework for evaluating weight loss drug exclusions in an effort to successfully resist judicial scrutiny under the ADA.
The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.
Lisa Wintersheimer Michel
513.579.6462
lmichel@kmklaw.com
John F. Meisenhelder
513.579.6914
jmeisenhelder@kmklaw.com
Antoinette L. Schindel
513.579.6473
aschindel@kmklaw.com
Kelly E. MacDonald
513.579.6409
kmacdonald@kmklaw.com
Rachel M. Pappenfus
513.579.6492
rpappenfus@kmklaw.com
KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.
