Government Announces Non-Enforcement Policy Over 2024 MHPAEA Regulations While Seeking Pause in Litigation

On May 9, 2025, attorneys for the federal government filed a motion for abeyance in the Administrative Procedure Act (APA) lawsuit filed by The ERISA Industry Committee (ERIC) in January 2025, challenging parts of the Mental Health Parity and Addiction Equity Act (MHPAEA) regulations issued by the U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) in September 2024. In its motion, the government states that the requested pause in the litigation will enable the Departments to "reconsider the 2024 Rule at issue in this litigation, including whether to issue a notice of proposed rulemaking rescinding or modifying the regulation." In addition, while attempting to obtain ERIC's consent to the motion, the Departments provided ERIC "a copy of the nonenforcement policy that they expect to publicly release memorializing their intention not to enforce the portions of the 2024 Rule that are applicable for plan years beginning on or after January 1, 2025, and January 1, 2026."

According to the motion:

On April 25, 2025, the Departments informed undersigned counsel that they intend to (1) issue a non-enforcement policy in the near future covering the portions of the 2024 Rule that are applicable for plan years beginning on or after January 1, 2025 and January 1, 2026, and (2) reexamine the Departments' current MHPAEA enforcement program more broadly.... Because the Departments do not intend to enforce parts of the rule and have indicated that they intend to reconsider the regulation challenged in this litigation, the government respectfully submits that it would be appropriate to place this case in abeyance pending the completion of that reconsideration process. Abeyance will greatly conserve party and judicial resources because the Department's reconsideration and potential rescission or modification of the rule will likely bear on the issues presented in this case and potentially obviate the need for further litigation.

The motion states that the yet-to-be-released non-enforcement policy was finalized on May 8, 2025, and that ERIC consented to the requested stay, but "reserve[s its] right to resume litigation at any time if necessary." The government, which faced a May 12, 2025 deadline to file an answer, offered to provide the court periodic updates of its internal review of the regulations. 

Sixth Circuit Affirms Dismissal of 401(k) Fees Suit Under Fiduciary Duty Pleading Standard

On May 6, 2025, the Court of Appeals for the Sixth Circuit affirmed a decision by the District Court for the Eastern District of Michigan dismissing a putative class action complaint in England v. DENSO Int'l America Inc., et al., No. 24-1360 (6th Cir. 2025). The plaintiffs originally filed their lawsuit against DENSO in March 2022, alleging the company violated ERISA by causing its 401(k) plan to overpay for recordkeeping and administrative services. In July 2023, the district court dismissed the complaint holding that the plaintiffs failed to set forth the required "context-specific" facts, such as the types and quality of services provided, to render plausible an ERISA overpayment-for-recordkeeping-services claim. 

In their complaint, the plaintiffs alleged that DENSO breached ERISA's duty of prudence by causing the plan to pay "approximately $71 per participant" for recordkeeping fees and administrative services, while other similarly sized plans have paid been between "$25 to $39 per participant" for a similar level and qualify of services. The plaintiffs further alleged that this breach cost the plan over $3.4 million. They also asserted that DENSO failed to monitor the selection of the plan's recordkeeper.

In affirming the district court's dismissal, the Sixth Circuit noted that the plaintiffs failed to meet the pleading standard for a claim of breach of the duty of prudence with respect to the plan's fees, which requires allegations "'that the fees were excessive relative to the services rendered'" or to present "'other factors relevant to determining whether a fee is excessive under the circumstances'" (citing Smith v. CommonSpirit Health, 37 F.4th 1160, 1169 (6th Cir. 2022)). The Sixth Circuit noted that the plaintiffs did not allege any details about the type or quality of services received by the plans they used as comparators who paid "$25 to $39" per participant for recordkeeping services. According to the court, this failure prevented the court from comparing the administrative and recordkeeping services that were provided to the plaintiffs' benchmark plans to those provided to the DENSO plan to determine whether the fees paid were excessive as alleged. The court concluded that

there is a distinction between generally alleging that bundled recordkeeping and administrative services provided to mega plans all offer essentially the same thing and alleging that the services offered to and utilized by the Plan here did not justify the cost difference in fees; here plaintiffs alleged the former, and under Smith, they needed to sufficiently allege the latter.  

Because of this pleading failure, the Sixth Circuit agreed with the district court that the plaintiffs' allegations did not support a plausible claim for breach of the duty of prudence with respect to the plan's recordkeeping and administrative fees.

In reaching its holding, the Sixth Circuit distinguished the Seventh Circuit's decision in Hughes v. Northwestern University, 63 F.4th 615 (7th Cir. 2023), stating that Hughes conflicts with Smith's demand for context-specific facts showing that fees are excessive relative to the services rendered. The court stated that "[t]he general allegation that comparable recordkeepers are 'equally capable of providing a high level of service' may have been enough for the Hughes court, but it is not specific enough for this one" (emphasis in original). According to the court, that type of general allegation "explains neither what 'high level of service' is and what services the plan utilized, nor whether those services were comparable to those provided to the asserted competitors."

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