Hughes v. Northwestern University
Issues
Whether allegations that an employer 403(b) retirement plan charged excessive fees when lower cost investment products and services were available are sufficient to bring a claim for a breach of fiduciary duty under ERISA?
This case asks the Supreme Court to determine the standard to bring a claim that applies to a breach of fiduciary duty under the Employment Retirement Income Security Act (“ERISA”) for allegations of excessive investment fees and recordkeeping fees. April Hughes and other employees at Northwestern University brought suit, claiming Northwestern’s breach of fiduciary duty in ERISA retirement plans, pointing to a large investment option menu and higher-than-average fees. In particular, petitioner April Hughes and others argue that an ERISA’s fiduciary duty of care stems from trust law, and that Northwestern’s imprudent investment and recordkeeping decisions caused excessive fees and breached their duty of care. Respondent Northwestern University answers that context-specific scrutiny is the proper standard for fiduciary duty under ERISA, and that its plan’s cost reflects its prudent investment and recordkeeping decisions. The outcome of this case will impact those people that participate in savings programs that are offered by their employers and the employers themselves, as well the fiduciary duties of said employers, the rights of the beneficiaries, and the available investment options of the beneficiaries.
Questions as Framed for the Court by the Parties
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?
April Hughes, Laura Divane, and others (collectively referred to as “Hughes”), employees at Northwestern University (“Northwestern”), entered into defined contribution plans, administered and developed by their employer Northwestern, under the Employee Retirement Income Security Act (“ERISA”). Divane, et al. v. Northwestern University, et al. at 983.
Additional Resources
- Rebecca Moore, High Court Agrees to Review Northwestern University ERISA Suit, Plan Advisor (July 2, 2021).
- Supreme Court Will Hear Case Challenging Retirement Plan Investment And Recordkeeper Fees, JD Supra (July 15, 2021).