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AARP Foundation Weighs in on U.S. Supreme Court Pension Case

It should be easier for retirees to raise mismanagement claims


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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.

“Retirees need to understand their pension plan’s different fees, which should be broken down in their statements, to ensure that their returns are as significant and true to what they should be getting as possible,” Lopez said. 

AARP and AARP Foundation believe the current standard set by the lower court goes against the plain language and purpose of the statute, according to our amicus brief. 

The Second Circuit’s ruling, Lopez said, requires pensioners and retirees to show detailed information they may not have access to at the outset of a case, even before they have a chance to get it from their pension plan. Requiring this information up front shifts the burden of proof and could hurt claimants, who often are older adults on a fixed income, he said. 

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Several circuit courts previously ruled on the issue raised in Cunningham and set different standards, which is why, Lopez said, AARP and AARP Foundation believe it’s important for the Supreme Court to weigh in. We are arguing for “a straight reading of the statute.”

“The Second Circuit is now saying pensioners need to show something more to avoid having their claims dismissed,” Lopez said, “and that is what we think is problematic.”

Find out more about retirement and pensions and see if you’re on track for retirement with AARP’s retirement calculator

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