Rare Pentegra 401(k) Jury Verdict Is ERISA Plaintiffs’ Roadmap

A $38.8 million verdict for participants in a 401(k) plan administered by Pentegra Services Inc. is a step forward for ERISA plaintiffs eager for the rare chance to present a case under the federal benefits law to a jury.

Pentegra and the plan’s board of directors breached their fiduciary duties by causing the plan to pay unreasonable administrative fees, the eight-person jury unanimously concluded April 23 after a trial lasting about a week in the US District Court for the Southern District of New York. The 26,000-person class action centers on fees charged by a $2.1 billion retirement plan covering employees across hundreds of different financial institutions.

The verdict comes as courts within the Second Circuit grapple with whether plaintiffs are entitled to jury trials in fiduciary breach cases arising under the Employee Retirement Income Security Act. It’s the first jury outcome in an exclusively ERISA-based case to award plaintiffs monetary damages, establishing an early model for workers and retirees suing their employers to bypass a bench trial and take their claims to citizen adjudicators.

“Lawyers that are on my side of the ledger should be collecting these results and fighting for a jury trial every single time,” said Evan Schwartz, a plaintiffs’ litigator and founder of Schwartz, Conroy & Hack, PC in New York.

A lawyer for the Pentegra participants praised the verdict as a “hard-fought victory” and a “triumph of the American jury system.”

“Even within the unfamiliar confines of ERISA, the jurors were able to clearly see the conflicts of interest and fiduciary failures here,” plaintiffs’ counsel Nathan Stump of Schlichter Bogard LLC said in an emailed statement. “Their verdict is a testament to our judicial system and a powerful statement for employees and retirees across the country.”

Rare Move

Jury trials in ERISA cases are extremely rare; one federal judge recently mused that the two go together as poorly as “drinking and driving or Texas chili and beans.”

Most courts have concluded that ERISA class actions seek the kind of equitable remedies like removal of fiduciaries or mandatory plan amendments that require a trial by a judge. Only legal remedies like money damages can be submitted to a jury. Courts have denied jury trial requests in a host of ERISA cases, including ones against Anthem Inc., BB&T Corp., Duke University, and Oracle Corp.

Uniquely within the US Court of Appeals for the Second Circuit, which encompasses New York, Connecticut, and Vermont, judges overseeing ERISA cases have sometimes bucked this trend. A 20-year-old Second Circuit ruling in Pereira v. Farace put greater weight on the second part of a US Supreme Court test for discerning legal remedies from equitable ones, which focuses on whether awarded damages are equitable restitution or compensatory.

“It’s a little sliver of an opportunity for plaintiffs in the Second Circuit to demand a jury trial,” said Nancy Ross, a Mayer Brown LLP partner in Chicago.

Courts within the Second Circuit have granted jury trial requests in ERISA cases targeting Pentegra, Cornell University, Eversource Energy Service Co., and Yale University.

ERISA allows benefit plans to include venue clauses that specify the courts or jurisdictions in which participants can sue. Plan sponsors weighing whether to adopt venue clauses may want to consider their likelihood of facing a jury trial in a given jurisdiction as one factor informing their decision, said Joseph Torres, a partner with Jenner & Block LLP in Chicago.

Awaiting Guidance

The Yale case went to trial in 2023, and a jury determined that the school breached its fiduciary duties by allowing its retirement plan to pay unreasonable recordkeeping fees. But jurors declined to award damages, ruling that this failure caused no harm to plan participants and rejecting their other claims.

The Yale case is on appeal with the Second Circuit, which heard arguments in 2024 and hasn’t yet issued a ruling.

Ross, who represents the school, has cross-appealed the decision allowing a jury trial. ERISA trials are complicated, and deserve careful analysis by a judge, not a jury that can be persuaded by savvy plaintiffs’ lawyers who may characterize plan sponsors as “bad corporate people were playing fast and loose with your retirement money,” Ross said.

“The judge is going to feel compelled to apply the law,” she added. “The jury is going to more likely decide right versus wrong than the nuances that the law interjects.”

The issue may ultimately wind up before the Supreme Court, particularly if there continues to be a lack of uniformity among lower courts, Torres said. The justices have expressed interest in hearing ERISA cases, and the availability of jury trials under the statute is a “nuts-and-bolts type issue” that all sides would appreciate guidance on, he said.

More to Come

Plaintiffs contend the Seventh Amendment gives participants and beneficiaries suing plan sponsors a right to a jury trial on claims seeking compensation. As happened in the Pentegra case, non-monetary remedies can be left up to a judge, they say.

The presiding judge in the Pentegra case, Philip M. Halpern, also oversaw a judge-only trial aimed at assessing whether the plaintiffs are entitled to plan changes or court orders removing plan fiduciaries from their posts. Halpern hasn’t yet ruled on those issues.

Schlichter Bogard continues to demand jury trials in ERISA excessive fee cases, citing their clients’ constitutional rights, and that “juries take their role seriously, as do judges,” said the firm’s founder, Jerry Schlichter.

Pentegra, which was represented by Groom Law Group in the jury trial, expressed disappointment in the verdict and said it’s reviewing its legal options.

“This litigation will not deter us from our mission,” a Pentegra spokesperson said in an emailed statement. “We remain focused on delivering innovative, compliant plan solutions, and on continuing to serve our clients with the excellence they expect from Pentegra.”

The case is Khan v. Bd. of Dirs. of Pentegra Defined Contribution Plan, S.D.N.Y., No. 7:20-cv-07561, jury verdict 4/23/25.