Supreme court case - excessive retirement plan fees

_HUGHES V. NORTHWESTERN UNIV._ No. 19-1401, 953 F.3d 980 (7th Cir. 2020), _cert. granted,_ 2021 WL 2742780 (U.S. July 2, 2021) YOU HAVE THE POWER TO CHANGE THE LIVES OF SENIORS IN POVERTY 1

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Decision (PDF) issued Jan. 24, 2022.  RESULT:  _The U.S. Supreme Court unanimously held that plan fiduciaries must eliminate investment options with excessive fees, and that giving

participants a “choice” to select among investment products is not sufficient if some of those options are imprudent._ ISSUE: _Whether allegations that a defined-contribution retirement plan

paid or charged its participants fees that substantially exceeded fees for alternative available investment products or services are sufficient to state a claim against plan fiduciaries for

breach of the duty of prudence under the __Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1104(a)(1)(B)__ (“ERISA”)._ ERISA is the federal statute that imposes fiduciary

duties on administrators of retirement plans to act with the care, skill, and diligence that a prudent person acting in a like capacity would use. The law also empowers a plan participant to

sue administrators for breaching these duties. Plaintiffs in this case are participants in the Northwestern University Retirement Plan. They allege that the retirement plan caused

participants to pay excessive recordkeeping fees by retaining multiple record keepers and failing to solicit competitive bids or negotiate for lower fees.  Petition for Writ of Certiorari at

1–2, _Hughes v. Nw. Univ._ (No. 19-1401). On May 25, 2018, the U.S. District Court for the Northern District of Illinois granted the defendant’s motion to dismiss. _Divane v. Nw. Univ._,

No. 16 C 8157, 2018 WL 2388118, at *14 (N.D. Ill. May 25, 2018). Plaintiffs alleged that participants in the retirement plan paid an average of between $153 and $213 per participant per year

and that the plan had an average expense ratio between .14% and .197%. _Id. _at *7. The court held that “there is nothing wrong for ERISA purposes, with the fact that the plan participants

paid the record-keeper expenses via . . . expense ratios” and that Northwestern was not required to “find a record-keeper willing to take” a lower flat fee per year. _Id. _at *8. Finally,

the court found that participants had options to keep the expense ratios low and could have invested in different funds—despite the fact that they had hundreds of options to choose from and

little, if any, guidance.  _Id._ at *8.