The Supreme Courtroom will hear the case of contesting pension plan investments and costs for the data Jackson Lewis PC
The Supreme Court recently issued the certificate of admission requested by the participants in the Northwestern University retirement plan following the Attorney General’s plea to hear the case. Hughes v. Northwestern Univ., No. 19-1401, 2021 US LEXIS 3583 (July 2, 2021). The Certiorari petition formulated the question as follows: “[w]hether allegations that a defined contribution plan paid or charged its participants fees in excess of the fees for alternative available investment products or services are sufficient to bring a claim against plan trustees for breach of duty of care under ERISA. “
In Hughes, the plan participant plaintiffs alleged that Northwestern had breached due diligence by paying (1) excessive fees for records (using multiple records and allowing recording fees to be paid through revenue sharing) and (2) mutual funds with excessive investments offered administration fees.
The District Court granted the defendants’ motion to dismiss and the Seventh District upheld. The Seventh Circuit found that no ERISA violation was found in relation to Northwestern’s records, stating that ERISA does not require a single record keeper and that “for ERISA purposes there is nothing wrong with the plan participants paying the cost of the Pay Records of Expense Ratios ”under a revenue-sharing agreement.
Regarding the excessive demand for the investment management fee, the Seventh Circuit concluded that the types of funds (low index funds) requested by plaintiffs were and are available to them, thereby “eliminating any allegation that the plan participants were forced to endure an unsavory menu. The Seventh Circuit stressed that Northwestern provided the plans “with a wide range of investment options” and offered “prudent explanations for the fiduciary decisions being challenged.”
The attorney general argued that the decision of the Seventh District Court was wrong and that its decision contradicted the decisions of the Third and Eighth Districts. Northwestern argued that no circuit conflict exists; instead, the circuits “simply achieved different results for different complaints”.
The Supreme Court’s decision to grant the Writ of certiorari found that Judge Barrett was not part of the examination of this petition. Judge Barrett did not attend because she was a judge in the Seventh District Court at the time of the Seventh District Court’s decision. Regardless of how the Supreme Court ultimately decides on this case, it is sure to have a significant impact on the more than 127 class action lawsuits against retirement plan fees that have been filed since January 2020.