Supreme Court Lowers the Bar for ERISA Lawsuits

Posted by PlanFees on May 29, 2025 7:33:00 AM

In Cunningham v. Cornell University, the Supreme Court ruled that plaintiffs bringing a claim under ERISA for a prohibited transaction are not required to plead the absence of a statutory exemption at the outset. The case involved allegations that Cornell’s 403(b) retirement plan paid its recordkeepers excessive fees — reportedly up to $200 per participant annually, compared to a claimed reasonable fee of $35 per participant.

The court’s decision clarified that plaintiffs need only allege the occurrence of a prohibited transaction under ERISA Section 406(a) to proceed. It is then the responsibility of the fiduciary to assert and prove that an exemption under Section 408(b)(2) applies — for example, by showing that the services were necessary and the fees reasonable.

Beyond a merely procedural clarification, the legal and practical implications of the court’s unanimous ruling on the Cunningham case are significant. It effectively lowers the threshold for costly and time-consuming excessive fee lawsuits to move forward and highlights the importance of thoroughly documenting fiduciary decision-making, especially around service provider compensation.

 

By benchmarking fees and services more frequently than the customary three-to-five year interval and keeping detailed records of the data that inform plan decision-making, you can help put fiduciaries in a stronger position to defend those decisions should they be challenged. PlanFees offers several tools that can help:

  • Prism Total Fees Benchmarking: Enables on-demand benchmarking of fees against industry standards, providing an immediate snapshot of how investment, recordkeeping, administrative and advisory fees compare to those of similar plans. This convenient tool is ideal for conducting a quick “fee checkup” to help identify potential red flags before they have a chance to become a larger problem.
  • Prism365 Advisor Fee & Services Benchmarking: Allows you to benchmark not just your advisory fees, but also the frequency of services — from meeting cadence to employee support — against industry norms, helping ensure fees are appropriately tied to appropriate services for the plan and its participants.
  • RFP Express: Powered by RPAG, this innovative RFP solution lets you quickly gather real-time pricing from leading recordkeepers, without the need for a more drawn-out, time-consuming RFP process, enabling greater responsiveness and agility in your efforts to keep fees reasonable and plans competitive.

Whether conducting a periodic fee review or a more in-depth service provider analysis, PlanFees’ innovative tools and technology equips fiduciaries with data-backed recommendations to help keep retirement plans compliant. 

As the Cunningham decision may set the stage for accelerated ERISA litigation, advisors and fiduciaries must be prepared to mitigate risk with a proactive and multipronged approach. PlanFees can be a vital part of that strategy while also helping advisors to elevate their offering with higher-touch, more responsive service to plan sponsors.

Benchmark better with PlanFees.

 

Sources

Topics: ERISA, Fee Benchmarking, Benchmarking