The Supreme Court Reverses the Ruling of the Employee Retirement Plan Lawsuit Against Northwestern University
April 18, 2022
At a glance
- The main takeaway: The Supreme Court reversed the dismissal of the employee-led lawsuit against Northwestern University reaffirming the duties of a retirement plan sponsor.
- Impact on your business: It’s crucial for any company that offers a retirement plan to employees to establish a written process that outlines how they monitor funds and manage recordkeeper fees.
- Next steps: Aprio’s Retirement Plan Services team can conduct a complimentary, thorough plan review to help ensure you are protected as a fiduciary.
Schedule a complimentary plan review with our Retirement Plan Services team today.
The full story:
The Supreme Court ruled in favor to reverse the dismissal of an employee lawsuit against Northwestern University over the mismanagement of their employee retirement plans. Employees of the university claimed the school violated their fiduciary duties by failing to offer lower investment cost options and not monitoring the excessive fees paid to the plan recordkeeper.
The district court and the U.S. Court of Appeals for the Seventh Circuit rejected these claims, stating that the university satisfied their obligation by providing at least some options. However, the Supreme Court unanimously disagreed with the Seventh Court, responding that they focused on the wrong aspect of the case. It is required that plan fiduciaries conduct their own independent evaluations to determine the investment options that should be included within the plan. Furthermore, if a fiduciary fails to remove any risky investments in a timely manner, they are in breach of their duty.
How does this impact your business?
The case, Hughes v. Northwestern University, puts a major spotlight on how employers manage their retirement plan options. While Northwestern University is on a national scale, this ruling is applicable to any company that offers investment options through a retirement plan for employees. If you don’t have a process in place to appropriately monitor these investments, it can leave the door open to litigation.
The bottom line
As with anything, the outcome of this case has the potential to move down the market to impact small-to-midsize companies. It’s important to have a written process in place to manage investment offerings as well as ensuring your provider fees are in line with industry standards and prepare to go to market every two-to-three years for benchmarking purposes. Aprio’s Retirement Plan Services Team continuously monitors updates happening within the larger markets and adopts new processes and procedures accordingly. Our team conducts complimentary full plan reviews of your investments, plan design and fiduciary processes to make sure you are set up properly and determine if there are any red flags that need to be addressed.
Click here to schedule a complimentary retirement plan review.