On January 3, 2025, the NAM filed an amicus brief asking the U.S. Supreme Court to reject the petitioners’ proposed water-down pleading standard for prohibited transaction claims brought under ERISA. The plaintiffs alleged in this putative class action that the defendants’ engagement of ERISA plan recordkeepers—which is a standard contractual arrangement necessary for the operation of a plan—was a prohibited transaction. However, ERISA does not consider “[c]ontracting or making reasonable arrangements with a party in interest . . . for services necessary for the . . . operation of [a] plan” a prohibited transaction so long as “no more than reasonable compensation is paid[.]” Accordingly, the Southern District of New York dismissed the plaintiffs’ complaint, and the 2nd Circuit affirmed on appeal. The U.S. Supreme Court agreed to address a split among circuit courts over the pleading standard for prohibited transaction claims brought under ERISA.
We argue in our brief that the U.S. Supreme Court should reject the petitioners’ position that to state a viable prohibited transaction claim, all a plaintiff must do is plead the existence of an enumerated transaction, and courts must ignore whether an exemption applies. We further argue that the plaintiffs’ position would upend benefit plans if plan fiduciaries faced the daunting prospect of expensive and asymmetrical discovery merely because they contracted with a service provider—which the nation’s millions of benefit plans do every day.