Alert: New American Airlines Lawsuit Underscores the Importance of 401(k) Plan Investment Analysis

At a glance

• The main takeaway: On January 10, 2025, the U.S. District Court for the Northern District of Texas issued a pivotal decision in Spence v. American Airlines, Inc., raising significant concerns about fiduciary practices such as delegating proxy voting authority and sponsors’ duty of loyalty to plan participants. The lawsuit also alleged that American Airlines violated their fiduciary responsibilities under ERISA by allocating millions of dollars from employees’ retirement savings to ESG-focused investment managers and funds.
• Impact on your business: This decision could have broad implications for 401(k) plan sponsors. Now is the time to ensure your retirement plan complies with ERISA standards and that your investment allocation aligns with your participants’ priorities and objectives.
• Next steps: Contact Aprio for an in-depth review and analysis of your retirement plan’s investment allocation.

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The full story:

A new lawsuit against American Airlines makes the case for the importance of third-party retirement plan analysis — and how it can help prevent discrepancies in sponsors’ and participants’ priorities and objectives for plan investment allocations.

The case in question was filed in the U.S. District Court for the Northern District of Texas by plaintiff Brian Spence, an American Airlines pilot and participant in the company’s employer-sponsored 401(k) plan. The defendants included American Airlines, its Employee Benefits Committee, Fidelity Investments Institutional, and Financial Engines Advisors, LLC, though the latter two were eventually dismissed from the case.

In the lawsuit, Spence alleged that the remaining defendants violated their fiduciary responsibilities under ERISA by allocating millions of dollars from employees’ retirement savings to environmental, social, and governance (ESG)-focused investment managers and funds. Spence accused the defendants of prioritizing shareholders’ goals and proxy voting over their fiduciary obligation to maximize financial returns solely in participants’ best interests. The lawsuit also criticized the defendants for allegedly prioritizing external policy objectives at the expense of the plan’s financial health.

Spence v. American Airlines, Inc.: The resolution and implications

On January 10, 2025, Judge Reed O’Connor, who presided over the case, determined that American Airlines and its Employee Benefits Committee violated ERISA’s duty of loyalty by including certain funds in the 401(k) investment lineup. While these funds were not explicitly ESG-focused, they were managed by an investment firm that the court found had engaged in ESG-related corporate interactions and occasionally supported ESG-driven proxy proposals. Ultimately, Judge O’Connor concluded that the defendants did not violate ERISA’s duty of prudence, because their oversight of the investment manager adhered to industry standards common among large plan fiduciaries.

Why plan sponsors should seek out an independent retirement plan analysis

While the Spence v. American Airlines, Inc. decision has several implications for 401(k) plans — extending beyond plans with ESG investments — the most important action you should take away from the ruling is the importance of giving your plan a second look.

From small startups to large corporations, plan sponsors tend to “set and forget” their 401(k) plans after they have established them. But it’s not enough to simply implement a retirement plan for your employees; it is critical to continually review your plan on an annual basis (at least) to ensure your investment allocation aligns with your goals, priorities, and objectives for the plan.

Lawsuits like Spence v. American Airlines, Inc. often arise from misaligned or even miscommunicated goals between sponsors and the firms that manage their plans. But you can avoid conflict and create a better retirement plan experience by getting an unbiased, thorough plan analysis on a regular basis.

The bottom line

At Aprio, we understand that your employees come first, and their needs, goals, and objectives should be the driving force of your retirement plan. In addition to providing comprehensive plan design consulting, employee education, and compliance solutions, our Retirement Plan Services team can also provide an independent analysis of your plan’s investment options and fees. We benchmark these components to industry standards and help ensure they match your plan document and investment philosophy.

If you would like to give your retirement plan a second look in light of the Spence v. American Airlines, Inc. ruling, schedule a consultation with our team today.

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