Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—4th Cir.: Putative class claimants in defined contribution plan sought ‘individualized’ monetary relief, (Mar 11, 2026)

By Ronald Miller, J.D.

The appeals court concluded that in the context of a defined contribution plan, a participant’s damages claim under § 502(a)(2) is an “individualized monetary claim.”

A district court erred granting certification of a class action under Rule 23(b)(1) in an ERISA suit in the context of a defined contribution retirement plan, where the employees were seeking primarily the recovery of monetary losses, ruled the Fourth Circuit. The employees had alleged that Genworth Financial breached its fiduciary duties in selecting and retaining certain investment opportunities for the plan because those funds, as a whole, were imprudent investments. The appeals court determined that when ERISA § 502(a)(2) claims are brought in the context of a defined contribution plan, they are “individualized monetary claims” and therefore cannot be joined in a mandatory class certified under Rule 23(b)(1) (Trauernicht v. Genworth Financial Inc., No. 24-1880 (4th Cir. Mar. 10, 2026)).

Retirement and Savings Plan. The plaintiffs in this action are two former employees of Genworth Financial, who each participated in a Retirement and Savings Plan sponsored by the employer during their employment. The employees elected to invest in BlackRock LifePath Index Funds. After each left the employment with Genworth Financial, he withdrew his assets from the Plan.

The Plan is a “defined contribution” plan, which holds and invests contributed funds from which it pays participants and beneficiaries a defined and fixed retirement income, typically based on their years of service and compensation.

The Plan includes individual retirement accounts for over 4,000 participants, and the aggregate value of those accounts was, during the relevant period, over $900 million. Plan participants are offered roughly a dozen investments from which they may select. The Plan permits participants “to change investment options on a daily basis.”

The BlackRock Life Path Index Funds offers a suite of funds geared to varying retirement dates that invest in passively managed funds that are generally designed to track the performance of a particular index and that charge relatively low fees.

Fiduciary duties. In August 2022, the employees commenced this class action, contending that their investments in the BlackRock LifePath Index Funds performed “significantly worse” than other, similar investments that the Plan could have offered and that a simple weighing of the merits and features of all other available funds would have raised significant concerns for prudent fiduciaries and indicated that the BlackRock funds were not a suitable and prudent option for the Plan. The employees alleged that the employer breached the fiduciary duties it owed to the Plan by failing to appropriately monitor the performance of the BlackRock funds, resulting in the imprudent retention of those funds in the Plan in violation of ERISA.

The district court recognized that the employees, as former participants in the Plan, lacked standing to obtain prospective relief and therefore dismissed their claim for injunctive relief pursuant to Rule 12(b)(1). However, it denied the employer’s motion to dismiss under Rule 12(b)(6), concluding that the employees had adequately alleged plausible breach of fiduciary duty claims.

Class certification. Shortly thereafter, the employees filed a motion to certify a class pursuant to Rule 23(b)(1) to consist of all Plan participants and beneficiaries. The district court granted the employees’ motion, finding that all of Rule 23(a)’s prerequisites were satisfied. The court also held that certification was appropriate under Rule 23(b)(1)(B) because adjudication of the plaintiffs’ breach of fiduciary duty claims would “involve the recovery and distribution of Plan assets on behalf of the Plan.”

On September 16, 2024, the Fourth Circuit granted the employer’s petition for permission to appeal the district court’s order pursuant to Rule 23(f).

Mandatory class. As an initial matter, the employer contended that the district court erred in “certifying a mandatory class under Rule 23(b)(1) for claims seeking individualized monetary relief.” The question presented was whether, given the context of a defined contribution plan, the employees’ claims for monetary relief under ERISA § 502(a)(2) and § 409(a) for a breach of fiduciary duties allegedly causing losses to a large number of individual retirement accounts in the Plan satisfy the requirements for certification of a mandatory class action under Rule 23(b)(1).

The Fourth Circuit began by considering the nature of the employees’ claims in order to determine whether they can be certified as a class action under Rule 23(b)(1).

Monetary damages. First, the appeals court noted that the employees were seeking primarily monetary damages for the employer’s selection and retention of the BlackRock funds in the menu of investment options it offered to plan participants. When ERISA § 409(a) is combined with the cause of action for “appropriate relief” created by ERISA § 502(a)(2), the two sections “allow for a derivative action to be brought by a retirement plan ‘participant’ on behalf of the plan to obtain recovery for losses sustained by the plan because of breaches of fiduciary duties.”

In a defined contribution plan, the assets of the plan are allocated to participants’ individual accounts. The scope of relief obtained by the plan varies considerably depending on whether the plan is a defined contribution plan or a defined benefit plan.

In the context of a defined contribution plan, a plan participant can bring an ERISA § 502(a)(2) claim to seek monetary relief, again on behalf of the plan, for the losses sustained with respect to the plan assets in his individual account. And such recovery would be paid to the participant’s individual retirement account based on the losses that particular account sustained as a result of the fiduciary breach. Consequently, when ERISA § 502(a)(2) claims are brought in the context of a defined contribution plan, they are “individualized monetary claims” and therefore cannot be joined in a mandatory class certified under Rule 23(b)(1).

Thus, the appeals court concluded that in the context of a defined contribution plan, a participant’s damages claim under § 502(a)(2) is an “individualized monetary claim.” Accordingly, it was clear that a mandatory class action under Rule 23(b)(1) was inappropriate.

Once a class is certified under Rule 23(b)(1), class members’ participation is “mandatory,” as “[t]he Rule provides no opportunity for (b)(1) or (b)(2) class members to opt out and does not even oblige the District Court to afford them notice of the action.” In light of the three kinds of class actions, defined by Rules 23(b)(1), 23(b)(2), and 23(b)(3), the Supreme Court has instructed that “individualized monetary claims belong in Rule 23(b)(3).”

Importantly, the Court has also warned that there is a constitutional dimension to the principle against aggregating individualized damages claims as part of a mandatory class. The Court explained, “In the context of a class action predominantly for money damages,” the “absence of notice and opt out violates due process,” providing “an additional reason not to read” the mandatory classes unduly broadly.

Because an action for damages for an alleged breach of fiduciary duties under ERISA § 502(a)(2) and § 409(a) in the context of a defined contribution plan amounts to an “individualized monetary claim,” the district court erred in joining such claims in a class action under Rule 23(b)(1).

“Inherent commonality”. The district court also erred when it relied on a perceived “inherent” commonality that the employer’s fiduciary breach was with respect to the Plan in granting class certification under Rule 23(a)(2). Rule 23(a)(2) provides that the party seeking class certification must demonstrate, as a prerequisite to such certification, that “there are questions of law or fact common to the class.”

Here, the district court’s conclusion about commonality rested on the assumption that ERISA § 502(a)(2) claims are inherently common. However, given that these are individualized claims, the district court needed to conduct a rigorous analysis to determine whether members of the class suffered the same injury, as required for finding commonality under Rule 23(a)(2).

In this case, the employees alleged injury by comparing the performance of the BlackRock funds to four comparator funds—two that invest in actively managed funds and two that invest in passively managed funds. However, the employer pointed out that when the comparison is made only with the passive funds, the record shows that there were many members of the class who suffered no injury as the result of the employer’s alleged fiduciary breach.

Thus, by postponing the necessary rigorous analysis of commonality, and instead, relying on the “inherent” commonality of § 502(a)(2) claims, the district court took the wrong approach.

Accordingly, the appeals court vacated the district court’s certification of a class action.

The case is No. 24-1880.

Judge: Niemeyer, P.

Attorneys: Eugene Scalia (Gibson, Dunn & Crutcher) for Genworth Financial Inc. James Edward Miller (Miller Shah) for Peter Trauernicht and Zachary Wright.

Companies: Genworth Financial Inc.

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