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When the 7^th Circuit Court of Appeals failed to uphold an action against the fiduciaries in Hughes v Northwestern, the plaintiffs took the case to the Supreme Court (No. 19–1401. Argued December 6, 2021—Decided January 24, 2022). Employees investing in the plan alleged that Northwestern “violated their statutory duty of prudence in many ways, [and three were at issue in the case before the court.]

• First, respondents allegedly failed to monitor and control their recordkeeping fees, resulting in unreasonably high costs to plan participants.
• Second, respondents allegedly offered a number of mutual funds and annuities in the form of “retail” share classes that carried higher fees than those charged by otherwise identical “institutional” share classes of the same investments, which are available to certain large investors.
• Finally, respondents al­legedly offered too many investment options—over 400 in total for much of the relevant period—and thereby caused participant confusion and poor investment decisions.” 

The Supreme Court agreed with each of the investor’s allegations. It explained that the Seventh Circuit’s exclusive focus on the fact that investors could choose lower-cost investments failed to consider the full duty of prudence. The Supreme Court had already made clear in an earlier case (Tibble v. Edison International, 575 U.S. 523 (2015)) that “even in a defined-contribution plan where participants choose their investments, plan fiduciaries are required to conduct their own independent evaluation to de­termine which investments may be prudently included in the plan’s menu of options. See 575 U. S., at 529–530. If the fiduciaries fail to remove an imprudent investment from the plan within a reasonable time, they breach their duty.”

The Supreme Court sent the case back to the 7^th Circuit and ordered that it use the Supreme Court’s reasoning in Tibble when looking at the merits of the case rather than investor choice alone. This new ruling is already impacting a case with similar facts involving a Georgia health care system trying to avoid a class action that is in the courts. Clearly, the U.S. Supreme Court means what it says, especially with a unanimous verdict. Employers take note and ensure that plan fiduciaries are meeting their obligations.