The Supreme Court of the United States ruled unanimously Monday to resurrect a lawsuit against Northwestern University brought by university employees over the school’s alleged violation of its fiduciary duties in managing employee retirement plans. All eight justices who participated (Justice Amy Coney Barrett was not involved in the case) sided with the aggrieved employees who claimed plan administrators violated their “duty of prudence.”
Northwestern’s retirement plan must comport with the Employee Retirement Income Security Act of 1974, known as “ERISA.” Under ERISA, fiduciaries who manage the plan must discharge their duties “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” A group of current and former employees sued the school, alleging that the fiduciaries who managed their plans were insufficiently prudent in that they offered “needlessly expensive investment options” and paid “excessive record keeping fees.”
Specifically, plaintiffs claimed that the fees charged for investments into mutual funds and index funds were excessive, and the bookkeeping rates charged were exorbitant and out of line with acceptable practices. The allegedly problematic investments were just some options available to investors, who were free to choose among over 200 investment options.
The...
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