ERISA and Arbitration: How Safe Is Your 401(k)?

Over the past twenty years, the Supreme Court has repeatedly held that arbitration agreements and class action waivers, when entered into without fraud or misrepresentation, are legally enforceable. This results in many consumers giving up their right to sue individually and on a class-wide basis. In a vast number of form contracts, consumers give up their rights to be heard in court and obtain relief should such a contract be breached. ERISA governs retirement plans and applies to most American workers with employer-sponsored pension plans. As the law currently stands, it is unknown whether arbitration clauses and class action waivers used in complicated plan agreements are legally enforceable. Supreme Court precedent suggests that contracts containing these clauses are enforceable. However, this Comment argues that there are legal elements unique to ERISA, such as privity concerns and built-in fiduciary duties, which cut against the enforcement of clauses and waivers. This Comment argues that if arbitration agreements and class action waivers become routinely used in ERISA documents, a huge number of consumers will be unable to sue retirement plan providers for breaches of ERISA contracts, causing the plan providers to engage in behavior that harms both the consumers and the American economy as a whole