Under ERISA, prudence is process, process, and more process.
By following a broadly inclusive investment choice process, Northwestern University’s 403(b) plan fiduciaries secured dismissal of the lawsuit now under consideration by the Supreme Court.1 In contrast, New York University’s 403(b) plan fiduciaries were unable to dismiss allegations that by failing to offer available institutional class shares, instead of the offered retail class option, they violated their fiduciary duties.2
The U.S. solicitor general, working with the Department of Labor (DOL), told the Supreme Court to take the Northwestern case because the decision is inconsistent with other decisions, the issues raised are of significant importance, and at least two of the Northwestern plaintiff claims (not using the lowest-cost share class and failing to take steps to attempt to reduce recordkeeping fees) state a plausible claim for breach of the ERISA duty of prudence.
The Supreme Court’s decision in Northwestern could bring some clarity and uniformity to the pleading standard for breach of fiduciary allegations related to plan expenses and investment options. The Northwestern and NYU decisions underscore a key difference in outcome, at least so far, in motion to dismiss litigation.
While the Supreme Court’s forthcoming decision will guide critical motion to dismiss litigation, two recent decisions show that for successful outcomes on the merits, substantial and detailed evidence of process as applied may...
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