Second Circuit Clarifies Article III Standing for ERISA 401(k) Mismanagement Claims

In Collins v. Ne. Grocery, Inc., No. 24-2339-CV, —F.4th—-, 2025 WL 2382948 (2d Cir. Aug. 18, 2025), the Second Circuit addressed the recurring question of when participants in a defined contribution plan have Article III standing to sue for alleged fiduciary breaches under ERISA. The court held that plaintiffs must plausibly allege a concrete financial loss to their own individual accounts to establish standing for monetary relief and cannot rely on generalized allegations of plan-wide mismanagement. The decision affirms in part and vacates in part a district court ruling dismissing claims brought by former employees of Tops Market and Price Chopper Supermarkets, participants in the post-merger Northeast Grocery 401(k) Plan.

The plaintiffs alleged that the Plan’s fiduciaries breached their duties of prudence and loyalty by: (1) selecting imprudent share classes when cheaper, better-performing ones were available; (2) failing to investigate alternative investment funds; (3) permitting excessive compensation to the Plan’s recordkeeper, Fidelity, through revenue sharing; and (4) favoring certain high-cost funds that allegedly benefitted fiduciaries at participants’ expense. They sought disgorgement, injunctive relief, and removal of certain fiduciaries.

The district court dismissed large portions of the complaint for lack of Article III standing, holding that plaintiffs had not alleged injury from investment options they never selected. The court allowed limited claims—such as those concerning monitoring of certain portfolio managers and direct recordkeeping costs—to proceed but ultimately dismissed those for failure to state a claim, denying leave to amend.

The Second Circuit’s opinion squarely addressed the threshold issue: how participants in a defined contribution plan must plead standing. Unlike defined benefit plans, where benefits are fixed regardless of plan performance, defined contribution participants “maintain individual investment accounts” whose value rises and falls with their chosen options. To establish standing, plaintiffs must therefore allege non-speculative financial harm to their own accounts.

The court emphasized that ERISA’s statutory grant of a cause of action does not eliminate the constitutional requirement of an “injury in fact.” Allegations that fiduciaries mismanaged funds generally, or selected imprudent investments that plaintiffs never chose, do not suffice.

The Second Circuit examined each of plaintiffs’ theories:

Share Class Claim – Plaintiffs argued fiduciaries imprudently failed to select cheaper share classes for certain funds. Because none of the plaintiffs invested in those funds, they alleged no individualized injury, and thus, lack standing.

Alternative Funds Claim – Similarly, plaintiffs alleged that the committee failed to replace expensive or underperforming funds with better alternatives. But no plaintiff invested in the identified funds, and they did not plead any injury to their own accounts.

Revenue Sharing/Recordkeeping Fees – Plaintiffs challenged Fidelity’s indirect compensation via revenue sharing. Again, because none invested in the identified fund carrying such fees, plaintiffs lacked standing.

Duty of Loyalty Claim – Plaintiffs alleged fiduciaries included costly funds with revenue sharing for self-interested reasons. Yet without personal investment in those funds, they did not show individualized harm.

By contrast, plaintiffs plausibly alleged injury for claims involving monitoring of three specific funds, at least one of which they invested in, and for excessive direct recordkeeping costs borne by all participants.

The court also rejected plaintiffs’ attempt to rely on “class standing” to challenge fiduciary practices affecting funds they had not chosen. Under NECA-IBEW Health & Welfare Fund v. Goldman Sachs, named plaintiffs may pursue class claims only if their own injuries implicate the “same set of concerns” as those of absent class members. Without any personal injury, plaintiffs’ claims could not satisfy this test.

The panel further clarified that plaintiffs cannot circumvent Article III by suing “on behalf of the Plan” absent individual financial harm. While plan-wide losses may exist, those losses must be tied to actual or imminent injury in a participant’s individual account.

The Second Circuit affirmed dismissal of claims where plaintiffs lacked individualized injury and vacated in part to allow certain claims tied to their own accounts to proceed. The decision underscores that ERISA plan participants must plead personal financial harm, not simply plan-wide mismanagement, to establish standing for monetary relief in defined contribution plan cases.