High Court Declines to Raise the Bar on Excessive Fee Cases

Summary

A unanimous U.S. Supreme Court revived a closely watched lawsuit alleging that the fiduciaries for Northwestern University's 403(b) plans violated ERISA by allowing excessive fees (Hughes v. Northwestern University, No. 19-1401 (US Jan. 24, 2022)). While the court didn't address the substance of the participants' ERISA claims, the ruling confirms that the mere presence of prudent investment options in a defined contribution (DC) plan won't insulate fiduciaries from potential liability for other allegedly imprudent funds. But the court's opinion provides little practical guidance to the 7th US Circuit Court of Appeals — which must now reconsider its decision upholding dismissal of the lawsuit — or the many other federal courts evaluating the viability of similar lawsuits involving both 403(b) and 401(k) plans.