HR6084-119

What This Bill Does

This bill changes how certain ERISA civil lawsuits proceed against employee benefit plans and fiduciaries. In suits alleging that a fiduciary caused a plan to engage in a transaction violating ERISA section 406(a)(1)(C) or (D), the plaintiff must plausibly allege and prove that the transaction is not exempt under section 408(b)(2). In suits involving the purchase or sale of qualified employer securities, the plaintiff must plausibly allege and prove that the transaction is not exempt under section 408(e).

The bill also creates an automatic stay of discovery and other proceedings while a Rule 12 motion, or a reply to an answer under Rule 7(a)(7), is pending in an ERISA civil action against a plan or fiduciary. A court can allow particularized discovery if needed to preserve evidence or prevent undue prejudice. During the stay, parties with actual knowledge of the complaint must preserve documents, electronically stored data, and tangible objects that they reasonably believe are relevant, including materials held by recordkeepers in the plan's or party's possession, custody, or control. A party harmed by willful noncompliance can seek sanctions. Federal courts may also stay state-court discovery when needed to protect the federal ERISA stay.

Who Benefits and How

ERISA plan fiduciaries benefit because plaintiffs must plead and prove the absence of key prohibited-transaction exemptions instead of forcing fiduciaries into immediate discovery. Employee benefit plans benefit from lower early litigation pressure and reduced discovery costs while dismissal motions are pending. Plan sponsors benefit if meritless or weak prohibited-transaction suits become harder to maintain. ERISA defense attorneys benefit from clearer pleading-stage arguments and a statutory discovery-stay tool. Plan recordkeepers benefit from explicit preservation rules that identify their document obligations during a stay.

Who Bears the Burden and How

Plan participants bringing ERISA suits must plead more detailed exemption facts and prove that section 408(b)(2) or 408(e) does not protect the challenged transaction. ERISA plaintiff attorneys must investigate exemptions earlier, before broad discovery begins. Federal judges must manage discovery-stay motions, particularized-discovery requests, sanctions applications, and any state-court stay requests. Plan fiduciaries and recordkeepers must preserve relevant documents during the stay or risk sanctions. State courts may see discovery halted when a federal court finds a stay necessary to protect its ERISA jurisdiction or judgments.

Key Provisions

• Requires ERISA plaintiffs alleging section 406(a)(1)(C) or (D) violations to plausibly allege and prove that section 408(b)(2) does not exempt the transaction.
• Requires ERISA plaintiffs challenging qualified employer securities transactions to plausibly allege and prove that section 408(e) does not exempt the transaction.
• Provides an automatic stay of discovery and other proceedings during specified early dismissal pleadings.
• Requires parties with actual knowledge of the allegations to preserve relevant documents, electronically stored data, and tangible objects during the stay.
• Provides sanctions for willful failure to comply with preservation obligations.
• Authorizes federal courts to stay related state-court discovery when needed to protect federal ERISA proceedings.