Some employees in New Jersey who have retirement plans may be affected by a case that the U.S. Supreme Court has agreed to hear. The issue at stake is one that district courts have different opinions on. A decision by the Supreme Court would resolve a dispute over the fiduciary responsibility required by the Employment Retirement Income Security Act of 1974.
The case
The case involved retirement accounts available to employees at Northwestern University. In 2016, a law firm filed suit on behalf of two participants in the university’s 403(b) plan on the grounds that they were being charged excessive fees. In both a lower court decision and an appeal in the Seventh Circuit, the ruling went against the plaintiffs, with one judge writing that the defendants did not violate their fiduciary duty under ERISA because the plaintiffs could have resolved the issue by choosing different and less costly investment options.
Other legal views
However, the federal government has filed a brief in support of the plaintiffs, arguing that the position of the Seventh Circuit about access to lower-cost options did not remove the obligation of the fiduciaries in regards to the much higher fees associated with other options. In fact, in similar lawsuits in the Third, Eighth and Ninth Circuits, the position of the plaintiffs has been looked upon more favorably, in contrast to the Seventh Circuit ruling.
ERISA was put in place after some high-profile incidents in the 1960s in which workers lost large portions of their pensions, and it is designed to regulate qualified plans and protect the workers who invest in them. Under ERISA, plan participants have the right to file a lawsuit if they believe that plan administrators have not fulfilled their fiduciary duty. The Supreme Court’s ruling will clarify a portion of the complicated ERISA regulations that clearly leads to varied interpretations and might offer more protection to employees with qualified retirement plans in the future.