Fourth Circuit Deals Significant Blow to Mandatory Class Certification in ERISA Defined Contribution Plan Litigation

On March 10, 2026, the United States Court of Appeals for the Fourth Circuit published an opinion in Trauernicht v. Genworth Financial, Inc., No. 24-1880, reversing and vacating a district court order certifying a mandatory class under Federal Rule of Civil Procedure 23(b)(1) in a breach of fiduciary duty case under the Employee Retirement Income Security Act (“ERISA”). The decision is significant for plan sponsors and fiduciaries across the country, as it establishes, at least in the Fourth Circuit, that ERISA § 502(a)(2) claims brought in the context of a defined contribution plan are “individualized monetary claims” that cannot be aggregated into a mandatory class action, and it reinforces defendants’ ability to argue that certification should be denied where plaintiffs cannot demonstrate that proposed class members have actually suffered the same injury.

Background

Two former employees of Genworth Financial, Inc. (“Genworth”) brought a class action alleging that Genworth breached its fiduciary duties under ERISA § 502(a)(2) and § 409(a) by selecting and retaining certain target date funds (“TDFs”) as the target date offering in the Genworth Financial, Inc. Retirement and Savings Plan (the “Plan”), a defined contribution plan with over 4,000 participants and more than $900 million in aggregate assets.  The plaintiffs alleged that the Plan’s TDFs performed “significantly worse” than other available TDFs and identified four comparator funds—the Vanguard Target Retirement Funds, the Fidelity Freedom Index Funds, the T. Rowe Price Retirement Funds, and the American Funds—the first two of which were passively managed and the latter two were actively managed.

In response to Genworth’s motion to dismiss, the district court found that the named plaintiffs, as former Plan participants, lacked standing to seek prospective relief and thus dismissed their claim for injunctive relief.¹  But the court permitted the fiduciary-breach claims for monetary relief to go forward.  Later, the district court certified a mandatory class under Rule 23(b)(1) consisting of all participants and beneficiaries whose accounts were invested in the Plan’s TDFs from August 1, 2016, through the date of judgment. In doing so, the court concluded that ERISA § 502(a)(2) claims, which purport to be asserted on behalf of a retirement plan, “inherently present issues common to [a] class because liability arises out of the defendant’s conduct with respect to the plan which does not vary depending on which participant brings the action.”² The court also held that the “derivative nature” of § 502(a)(2) claims made certification under Rule 23(b)(1) appropriate, characterizing the action as “a derivative lawsuit on behalf of the Plan for recovery to the Plan as a whole.”³

The Fourth Circuit granted Genworth’s petition for interlocutory review under Rule 23(f) and reversed on two independent grounds.

Holding One: Defined Contribution Plan Claims Under § 502(a)(2) Are “Individualized Monetary Claims” Inappropriate for Rule 23(b)(1) Certification

The heart of the Fourth Circuit’s opinion is its holding that the nature of relief available under ERISA § 502(a)(2) differs fundamentally depending on whether the underlying plan is a defined benefit plan or a defined contribution plan. In a defined benefit plan, where plan assets are held collectively and used to pay fixed retirement benefits, a participant injured by a fiduciary breach must seek recovery on behalf of the plan as a whole because “there is no other way ‘to make good to such plan [the] losses to the plan resulting from [the fiduciary] breach.’”⁴

A defined contribution plan, however, presents an entirely different picture. Because plan assets are allocated to individual accounts and each participant’s benefits are “based solely upon the amount” held in his individual account, a participant bringing a § 502(a)(2) claim seeks relief for “fiduciary breaches that impair the value of plan assets in [his] individual account.”⁵ The court emphasized that any recovery in a defined contribution plan would be paid “not to the plan generally, nor to the participant directly, but rather to the participant’s individual retirement account based on the losses that particular account sustained as a result of the fiduciary breach.”⁶ Moreover, the losses to each individual account “would vary significantly depending on factors like how much money a participant had invested in the imprudent fund, how long he had held the investment, and the precise timing of when he had bought and sold.”⁷

Drawing on the Supreme Court’s decisions in Massachusetts Mutual Life Insurance Co. v. Russell, 473 U.S. 134 (1985), and LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248 (2008), the Fourth Circuit explained that, while both cases confirm the derivative nature of § 502(a)(2) claims, LaRue established that “the ‘entire plan’ language from Russell . . . does not apply to defined contribution plans.”⁸ Rather, in a defined contribution plan, “several plaintiffs may end up bringing their own actions for the impairment of the value of the plan assets in their individual accounts, and any recovery would be payable to those individual accounts.”⁹

Because these claims amount to “individualized monetary claims,” the court held, they cannot be joined in a mandatory class under Rule 23(b)(1), which affords class members neither notice of the action nor the right to opt out. The court also warned that mandatory class treatment of individualized damages claims raises due process concerns, citing the Supreme Court’s recognition in Ortiz v. Fibreboard Corp. that “our deep‑rooted historic tradition that everyone should have his own day in court” precludes gathering damages claims “in a mandatory class” without class members’ consent. 527 U.S. 815, 846-47 (1999).¹⁰

Holding Two: The District Court Failed to Conduct a Rigorous Commonality Analysis Under Rule 23(a)(2)

As an independent basis for reversal, the Fourth Circuit held that the district court erred in finding that the commonality prerequisite of Rule 23(a)(2) was satisfied. The district court had concluded that § 502(a)(2) claims “inherently present issues common to [a] class” — essentially treating commonality as a given in any ERISA fiduciary breach case. The Fourth Circuit rejected this approach, holding that the district court was required to conduct a “rigorous analysis” to determine whether members of the proposed class had actually “suffered the same injury.”¹¹ The court re-emphasized that “[t]his does not mean merely that they have all suffered a violation of the same provision of law,” and that “the mere claim” of similar injuries “gives no cause to believe that all their claims can productively be litigated at once.”¹²

The failure to perform this analysis was particularly consequential given the evidence in the record. The court credited Genworth’s argument that the Plan’s TDFs, as passively managed funds, must be compared only to other passive comparators, not to actively managed alternatives. When the proper passive comparators were used, the evidence showed that several of the Plan’s TDFs fund vintages actually outperformed the passive alternatives, accounting for as much as 42% of the Plan assets invested in the TDFs. Thus, many class members suffered no injury at all, rendering the proposed class “too overinclusive to ensure commonality.”¹³

The court also highlighted that each class member participated in the Plan in a “materially different way”: Each participant made different investment decisions with respect to their individual account, could change those decisions on any given day, selected different TDF vintages at different times and under different market conditions, and withdrew assets from the Plan at different times. These differences further demonstrated that the district court’s reliance on “inherent” commonality was “overgeneralized” and “failed to recognize that a given statute ‘can be violated in many ways.’”¹⁴

Broader Implications for ERISA Fiduciary Breach Litigation

The Genworth decision carries several significant implications for the growing wave of ERISA fiduciary breach class actions targeting defined contribution plans.

Mandatory class certification is no longer a foregone conclusion. For years, plaintiffs in ERISA § 502(a)(2) cases have treated Rule 23(b)(1) certification as virtually automatic, relying on the derivative nature of fiduciary breach claims. The Fourth Circuit’s opinion disrupts this framework by drawing a clear line between defined benefit plans (where mandatory class treatment may remain appropriate) and defined contribution plans (where it does not). Plan sponsors facing these claims now have strong appellate authority for arguing that mandatory certification is improper and that plaintiffs must instead seek certification under Rule 23(b)(3), with its attendant requirements of predominance, superiority, notice, and opt-out rights.

Courts must rigorously analyze commonality, even in ERISA cases. The opinion reaffirms that commonality under Rule 23(a)(2) requires more than pointing to a uniform fiduciary duty owed to a plan: It requires demonstrating that class members actually suffered the same injury. In defined contribution plan cases, where participants invest in different funds, at different times, and under different market conditions, this requirement will frequently be difficult for plaintiffs to meet. The court’s emphasis on the inclusion of participants whose investments actually outperformed the proffered comparators is a particularly powerful tool for defendants at the class certification stage.

The comparator-selection debate has new significance at class certification. The Fourth Circuit’s endorsement of the distinction between passive and active fund comparators elevates the comparator dispute from a merits question to one with class certification consequences. Defendants should work with counsel to develop comparator evidence early in litigation to deploy at the class certification stage.

A Caveat: Rule 23(b)(3) Remains Available

The Genworth court addressed only certification under Rule 23(b)(1) and the commonality prerequisite of Rule 23(a)(2); it did not address whether these claims could satisfy the requirements for certification under Rule 23(b)(3), which provides notice and opt-out rights. Plaintiffs in future cases may attempt to certify classes under Rule 23(b)(3), though they would then need to satisfy the more demanding requirements of predominance and superiority, which may prove difficult, given the individualized nature of the claims and damages.

Vinson & Elkins has extensive experience representing companies in complex ERISA litigation, including class actions and multidistrict litigation. Our team regularly advises plan sponsors, fiduciaries, and corporate defendants on the full spectrum of ERISA fiduciary breach and excessive-fee claims, from early case assessment through trial and appeal. For questions about how the Genworth decision may affect your pending or anticipated litigation, please contact any member of our team.

¹ Trauernicht v. Genworth Fin., Inc., No. 3:22-CV-532, 2024 WL 3835067 (E.D. Va. Aug. 15, 2024), rev’d and vacated, No. 24-1880, 2026 WL 667917 (4th Cir. Mar. 10, 2026).

² Id. at *8.

³ Id. at *14.

⁴ Trauernicht v. Genworth Fin. Inc., No. 24-1880, 2026 WL 667917, at *6 (4th Cir. Mar. 10, 2026) (quoting 29 U.S.C. § 1109(a)).

⁵ Id. at *7 (quoting LaRue v. DeWolff, Boberg & Assocs., Inc., 552 U.S. 248, 256 (2008)).

⁶ Id. at *6.

⁷ Id.

⁸ Id. at *7.

⁹ Id. at *8.

¹⁰ The court found support in the Ninth Circuit’s recognition in Dorman v. Charles Schwab Corp., 780 F. App’x 510, 514 (9th Cir. 2019), that “such claims are inherently individualized when brought in the context of a defined contribution plan.” The opinion also noted the Second Circuit’s contrary conclusion in Cedeno v. Sasson, 100 F.4th 386 (2d Cir. 2024), which held (over a dissent) that § 502(a)(2) “contemplates plan-wide remedies, and only plan­­­‑wide remedies” even in the defined contribution context.

¹¹ Id. at *9-11.

¹² Id. at *10.

¹³ Id.

¹⁴ Id. at *11.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.