Fourth Circuit Holds ERISA § 502(a)(2) Claims in Defined Contribution Plans Are Individualized and Cannot Be Certified as Mandatory Classes

In Trauernicht v. Genworth Fin. Inc., No. 24-1880, —F.4th—-, 2026 WL 667917 (4th Cir. Mar. 10, 2026), the Fourth Circuit reversed a district court’s class certification order in an ERISA fiduciary-breach lawsuit involving a defined contribution retirement plan. The court held that claims brought under ERISA § 502(a)(2) seeking recovery for investment losses in participants’ individual accounts constitute individualized monetary claims and therefore cannot be certified as mandatory classes under Federal Rule of Civil Procedure 23(b)(1).

Background of the Dispute

The case arose from the Genworth Financial, Inc. Retirement and Savings Plan, a defined contribution plan that allowed participants to select from a menu of investment options, including a suite of BlackRock LifePath Index target-date funds. Two former Genworth employees who participated in the plan filed suit alleging that Genworth breached its fiduciary duties by selecting and retaining the BlackRock LifePath Index Funds as plan investment options. According to the plaintiffs, those funds performed worse than alternative target-date fund suites that the plan could have offered, including options from Vanguard, Fidelity, T. Rowe Price, and American Funds.

The plaintiffs brought their claims under ERISA §§ 502(a)(2) and 409(a), which allow plan participants to pursue relief on behalf of the plan for losses resulting from fiduciary breaches. They sought recovery of alleged investment losses attributable to the plan’s continued use of the BlackRock funds. The district court dismissed their request for injunctive relief for lack of standing because the plaintiffs were former participants who had already withdrawn their assets from the plan. However, the court allowed the fiduciary-breach claims seeking monetary relief to proceed.

The plaintiffs subsequently moved to certify a class consisting of all participants and beneficiaries whose plan accounts were invested in the BlackRock LifePath Index Funds during the class period. The district court granted certification under Rule 23(b)(1), reasoning that ERISA fiduciary-breach claims brought under § 502(a)(2) are inherently representative actions on behalf of the plan and therefore appropriate for mandatory class treatment. Because any recovery would flow to the plan, the court concluded that the claims were plan-wide and did not involve individualized damages.

The Fourth Circuit disagreed and reversed the certification order.

Defined Contribution Plans and Individualized Losses

The court began by examining the nature of ERISA § 502(a)(2) claims in the context of different types of retirement plans. In a defined benefit plan, the plan holds assets collectively and pays participants fixed benefits. When fiduciary misconduct causes losses to such a plan, recovery must necessarily occur at the plan level because the plan’s assets are pooled. Under those circumstances, a participant’s claim is inherently plan-wide.

Defined contribution plans operate differently. In these plans, assets are allocated to individual participant accounts, and each participant’s retirement benefit depends on the contributions to that account and the performance of the chosen investments. As a result, any fiduciary breach affecting investment performance can produce different outcomes for different participants depending on their individual investment choices, timing of transactions, and amounts invested.

Because of those structural differences, the Fourth Circuit concluded that ERISA § 502(a)(2) claims involving defined contribution plans seek recovery for losses tied to individual accounts.

Although the action is technically brought on behalf of the plan, the relief ultimately corresponds to the losses experienced by particular participants’ accounts rather than a single undifferentiated plan-wide loss. In the court’s view, these claims are therefore best understood as individualized monetary claims.

Why Rule 23(b)(1) Certification Was Improper

That distinction proved decisive for purposes of Rule 23. Rule 23(b)(1) authorizes mandatory class certification in limited circumstances where individual lawsuits would create incompatible standards of conduct for the defendant or would effectively resolve the interests of absent class members. Unlike Rule 23(b)(3), however, Rule 23(b)(1) does not require notice to class members or give them the opportunity to opt out of the litigation.

The Supreme Court has emphasized that individualized claims for monetary damages generally belong in Rule 23(b)(3) classes precisely because that rule provides the procedural safeguards of notice and opt-out rights. Allowing individualized damages claims to proceed as mandatory classes raises significant due process concerns because absent class members could be bound by the outcome without any opportunity to pursue their own claims.

Applying those principles, the Fourth Circuit held that ERISA fiduciary-breach claims seeking damages for investment losses in defined contribution plans cannot be certified under Rule 23(b)(1). Because participants may experience different losses—or even gains—from the same investment option, their claims involve individualized monetary relief that cannot be aggregated in a mandatory class lacking opt-out protections.

The Court Also Found No Showing of Commonality

The court also concluded that the district court erred in finding that the Rule 23(a) requirement of commonality was satisfied. The lower court had reasoned that ERISA fiduciary-breach claims inherently present common issues because they arise from a fiduciary’s conduct toward the plan. The Fourth Circuit rejected that categorical approach.

Instead, the court emphasized that commonality requires a showing that class members suffered the same injury capable of resolution through common proof. In this case, the record suggested that many participants may not have suffered any injury at all because certain comparator funds underperformed the BlackRock funds during parts of the relevant period. Additionally, participants invested different amounts, chose different target-date fund vintages, entered and exited the investments at different times, and were exposed to different market conditions. These variations created substantial individualized questions regarding both injury and damages.

Because the district court relied on a generalized assumption of “inherent” commonality rather than conducting the rigorous analysis required by Rule 23, the Fourth Circuit held that certification was improper on that ground as well.

Accordingly, the Fourth Circuit reversed and vacated the district court’s order certifying the class.