On April 17, 2025, the U.S. Supreme Court issued a unanimous and impactful ruling in Cunningham v. Cornell University, reshaping the legal landscape for retirement plan fiduciaries (a.k.a. plan sponsors). If you are involved in the oversight of your company’s retirement plan, this decision is not just legal news — it’s a direct call to review your plan’s oversight process and the quality of your advisory services.
Fight over fees
The case originated in 2016, when participants in Cornell University’s multiple 403(b) retirement plans — representing approximately 28,000 employees — alleged that plan fiduciaries breached their duties under ERISA by permitting excessive fees through the use of multiple recordkeepers and a large menu of investment options. Lower courts dismissed the case, agreeing with Cornell’s defence that the plaintiffs failed to furnish sufficient facts to support a breach of fiduciary duty.
The persistent plaintiffs successfully appealed, pushing their case up to the Supreme Court, which reached a different conclusion. The justices ruled that plaintiffs bringing an ERISA “prohibited transaction” claim (under § 406(a)(1)(C)) do not need to show, at the pleading stage, that fiduciaries violated ERISA’s exemption rules, which permit reasonable compensation for necessary services. Instead, it is the fiduciary’s responsibility to prove they complied with those exemptions — effectively shifting the burden of proof from the plaintiff to the defendant (plan sponsor).
Plan sponsor’s risk increased
The ruling significantly reduces what plaintiffs need to show in order to survive a motion to dismiss. A plaintiff no longer needs to preemptively refute a plan sponsor’s defence that their actions were “reasonable.” As a result, ERISA class actions — particularly those involving plan fees, investment menus, and service providers — will likely increase in volume and reach earlier stages of discovery.
In short: It is now easier to sue plan fiduciaries for alleged excessive fees, and plan sponsors may face higher legal exposure even when their decisions were sound and well intentioned.
Safeguards against meritless claims
Acknowledging the risk of a flood of meritless lawsuits, the Supreme Court offered several ways for lower courts to maintain balance: 1) Courts may require plaintiffs, early in the case, to formally respond to a fiduciary’s affirmative defence that only reasonable fees were paid, helping to flush out weak claims, 2) Claims can still be dismissed if plaintiffs fail to allege a plausible injury, such as the presence of genuinely unreasonable fees or 3) If a defendant’s exemption defense is obvious, the court may impose sanctions or award attorneys’ fees to the defendant to deter frivolous claims.
While these measures offer some protection, the burden still lies with the plan sponsor to demonstrate that their plan process was prudent.
Plan sponsors’ action plan
This highly anticipated decision should remind all plan sponsors of the duties and responsibilities they accept when deciding to offer their employees a qualified retirement benefit. The key to protection lies primarily in the process you employ to make decisions, not merely the outcome. Now that it’s easier for plaintiffs to bring a complaint, plan sponsors will do well to remember the following:
Know the rules: Mandate ERISA fiduciary training for anyone in your organization who has a decision-making role in your organization’s qualified retirement benefits.
Construct a prudent process: Clearly outline responsibility for oversight of your plan within your organization. This process starts with a board resolution delegating authority over your plan. A committee charter and a current investment policy statement serve as vital tools in formalizing your governance process.
Document all decisions: Once your process is constructed, maintain good records all meetings and all fiduciary decisions regarding the plan, including the rationale for all decisions made. Quarterly meetings of plan fiduciaries is the industry best practice.
Properly communicate to participants: For defined contribution plans — ones in which participants are asked to make critically important decisions — be sure to communicate clearly and completely about the plan, its features, its fees, and participants’ responsibility to make their own decisions.
Annually audit your oversight practices: An annual review of plan utilization, the reasonableness of all plan fees using industry benchmarks, and a checklist of compliance with the plan’s operational requirements comprise best practice.
Know your plan costs: You need to understand the individual components of your retirement plan’s costs and should be able to demonstrate proactive activities to benchmark and manage these costs. This exercise needs to be well documented and should occur, at minimum, on an annual basis.
Your process is your protection
The Cunningham v. Cornell University decision is a sharp reminder that ERISA’s core fiduciary principles are focused less on outcomes and more on how decisions are made. With the burden of proof clearly laid at the feet of the plan sponsor, industry insiders predit the number of ERISA lawsuits will meaningfully increase, and the subject of these suits — once applied only to the largest of plans — will rapidly move downstream to target smaller plans. Your best defence remains active attention to the oversight process. A quality advisor will push your organization to implement the necessary process and will monitor your ongoing adherence to that process.
Written by Joseph Topp, CPA, Principal and Senior Vice President of Investment Consulting Services at Francis LLC for inclusion in WICPA’s On Balance magazine. The information contained herein is provided for informational purposes only. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Francis LLC does not offer personal legal advice, and this article is not intended as legal advice. Please consult with qualified ERISA counsel.
