AARP Hearing Center

Retirees who believe their pension plans are being mismanaged may currently find it hard to meet standards required to file claims against companies that oversee those plans. A case before the U.S. Supreme Court could make it easier for those complaints to gain traction.
Last month, AARP and AARP Foundation filed an amicus brief in the case, Cunningham v. Cornell University, arguing the burden of proof used to dismiss an employee’s claim in an earlier ruling of the case sets an “unattainable standard” and could discourage those receiving pensions from making claims. The Supreme Court is slated to hear oral arguments in the case on Jan. 22.
Under the federal Employee Retirement Income Security Act (ERISA), retirees can file a claim if they believe their pension plans are being mismanaged or subject to erroneous fees. In other cases, various circuit courts have come to differing conclusions about the burden of proof needed to file a plea against a plan.
The outcome of the Cunningham case could have big implications: A U.S. Department of Labor report found a mere 1 percent difference in fees and expenses can reduce a retiree’s balance at retirement by 28 percent.
“In this particular case, the pensioners claim that the plan was paying recordkeeping fees that were four to five times higher than average,” said Louis Lopez, AARP’s vice president of litigation. “Such a significant disparity, if proven, could result in a big financial loss at the end of one’s career, when many older adults are already facing economic hardships as they age."
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A heavy burden on retirees
Fiduciaries who manage pension and retirement accounts have a responsibility to work in the best interests of their account participants under ERISA. If participants find that questionable transactions occurred that could hurt them, they should be able to raise a claim.
But the process can be confusing. A March AARP study of pension program participants 50-plus found less than half (45 percent) of those with employer-sponsored retirement plans say they completely understand the notices they receive. Nearly the same number (42 percent) say they somewhat understand them and 12 percent understand them just a little or not at all.
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