The United States Supreme Court has agreed to hear a case on Jan. 22 involving the University and its employee retirement plan, with the potential to reshape how retirement plan administrators are held accountable under federal law.
The case, Cunningham et. al. v. Cornell University, focuses on the University’s alleged violations of the Employee Retirement Income Security Act, which sets minimum standards for private sector retirement and health plans, such as a process for grievances and appeals and the right to sue.
The plaintiffs, representing over 30,000 current and former employees enrolled in the University’s 403(b) retirement plans and nearly $3.4 billion in net assets, claim that Cornell fiduciaries — the people who managed money on their behalf — allowed for excessive fees, failed to remove underperforming investments and engaged in prohibited transactions.
While most of these claims were dismissed by lower courts, the plaintiffs hope the Supreme Court will reverse these rulings. A reversal would allow them to proceed with their legal claims against Cornell trustees, which were dismissed due to the Second Circuit’s interpretation of ERISA, requiring plaintiffs to show that services were unnecessary or fees were unreasonable to state a claim.
The lawsuit was originally filed in 2016 by law firm Schlichter Bogard, with the plaintiffs arguing that Cornell paid excessive fees to plan service providers TIAA-CREF and Fidelity Investments for recordkeeping and investment management. They claim these transactions violated Section 1106(a)(1)(C) of ERISA, which prohibits fiduciaries from engaging in specific financial arrangements with service providers unless necessary and reasonable.
Cornell has maintained that the plaintiffs failed to meet the legal requirements for such claims, arguing that ERISA demands conclusive proof of excessive fees or unnecessary services. The Court of Appeals for the Second Circuit agreed, dismissing most claims for insufficient evidence.
This decision contrasts with rulings in other circuits, such as the Eighth and Ninth, which allow prohibited transaction claims to proceed without requiring plaintiffs to demonstrate harm. These discrepancies prompted the Supreme Court to grant the case on Oct. 4 in hopes of clarifying ERISA’s pleading standards.
The federal government has also weighed in, filing an amicus brief in support of the plaintiffs. The Department of Labor and Department of Justice both argue that under ERISA, fiduciaries — not plaintiffs — bear the burden of proving compliance with exemptions to prohibited transaction rules. They contend that the Second Circuit’s ruling misinterprets ERISA, creating unnecessary barriers for employees seeking accountability.
This is not the first ERISA case to reach the Supreme Court. In earlier university lawsuits, such as Hughes v. Northwestern University (2021), the Court has ruled in favor of employees.
Should the Supreme Court side with the plaintiffs, Cornell employees — and millions of employees under retirement plans nationwide — would be able to file claims by alleging improper transactions without needing to demonstrate additional elements like harm or unreasonable conduct. Such a ruling would likely increase fiduciary accountability for employers across the country.
Conversely, if the Court upholds the Second Circuit’s decision, employees would face higher barriers to filing claims under ERISA, as they would need to prove unnecessary services or unreasonable fees. This would likely reduce lawsuits against employers, easing legal and administrative burdens but potentially weakening fiduciary accountability.
Without broader legal challenges, plan administrators might face less pressure to prioritize transparency, potentially undermining employee protections over time.
“Cornell believes the sole issue before the Supreme Court was correctly decided by the many courts of appeals that have rejected the pleading standard proposed by plaintiffs,” a University spokesperson wrote in a statement to The Sun. “We will articulate our arguments in our response brief to be filed later this month.”
The Supreme Court will hear oral arguments on Jan. 22, with Court opinions traditionally delivered in late June prior to their summer recess.
Jeremiah Jung ’28 is a Sun contributor and can be reached at [email protected].