Higher Ed Groups Back Cornell in Supreme Court Case Over 403(b) Retirement Plans

​The American Council on Education (ACE), along with 13 other higher education associations, has filed an amicus brief with the Supreme Court in Casey Cunningham v. Cornell University, a case that challenges how colleges and universities manage their 403(b) retirement plans under the Employee Retirement Income Security Act (ERISA). At the heart of the case is whether federal courts should require specific allegations of mismanagement to proceed with a claimed ERISA violation, or if a more lenient pleading standard should apply.In their brief, ACE and its co-signers voice strong support for Cornell University, highlighting the case's broader implications for higher education institutions, faculty, and staff, including those serving on investment and oversight committees for these plans. The amici caution that adopting the more relaxed pleading standard proposed by the plaintiffs will hinder effective plan administration and burden colleges and universities with excessive costs to defend against or settle unwarranted litigation, diverting resources from academic and research missions.

Protecting Retirement Plans for Higher Education Employees

The brief emphasizes the distinct characteristics of 403(b) retirement plans, widely used by colleges and universities to help faculty and staff secure financial stability in retirement. It underscores the necessity for institutions to rely on third-party service providers to navigate ERISA's complex regulatory landscape-a routine practice central to the administration of these plans.

ACE and the other associations caution that a Supreme Court decision favoring the plaintiffs' position could subject countless colleges and universities offering 403(b) plans-and those administering them-to a surge in lawsuits. Under the plaintiffs' proposed standard, it would be enough to merely allege that an institution provides an ERISA-covered retirement plan and engages in the routine and unavoidable practice of hiring third-party providers, forcing defendants to either settle or bear the significant costs of discovery until they can seek summary judgment, even in cases lacking substantive claims of wrongdoing.

In recent years, colleges and universities have faced an increasing wave of ERISA-related litigation. These cases, routinely dismissed or settled, impose substantial financial and operational burdens on institutions. The amici warn that adopting the plaintiffs' proposed permissive pleading standard would encourage and enable substantively meritless lawsuits. The financial strain of defending against unwarranted lawsuits would not just hurt institutions-it would also harm plan participants and beneficiaries, who may face reduced investment options and diminished services as universities attempt to manage litigation risks.

Impact on Faculty and Staff Fiduciaries

The brief highlights the personal risks faced by faculty and staff who serve on retirement plan oversight committees, emphasizing the potential chilling effect on participation in these critical roles.

Under ERISA, these individuals can be personally named as defendants in lawsuits, even when their decisions are made in good faith and with the best interests of plan participants in mind. This legal exposure, the brief warns, could deter qualified individuals from stepping into fiduciary roles, ultimately weakening the governance and effective management of retirement plans at colleges and universities.

Affirming a Sensible Legal Standard

ACE and the other associations urge the Supreme Court to affirm the Second Circuit's decision, which upheld a lower court's reasonable pleading standard. This standard strikes a sensible balance, allowing legitimate claims to proceed while requiring complaints to specifically allege impropriety in an institution's contract with a third-party service provider. The brief asserts that this approach is consistent with ERISA's goals and essential to ensuring the long-term sustainability of retirement plans in higher education.

The associations joining ACE on the brief include the Association of American Universities, the National Association of Independent Colleges and Universities, and the Association of Catholic Colleges and Universities, among others.

For more details, read the full amicus brief here.