960 F.3d 478
8th Cir.2020Background
- Plaintiffs (participants in Washington University’s 403(b) defined-contribution plan) sued under ERISA for breach of fiduciary duty, alleging excessive fees and retention of imprudent investments.
- WashU’s plan: ~115 investment options from TIAA and Vanguard, ~24,000 participants, ~$3.8 billion in assets.
- Fees at issue: investment-management fees (expense ratios) and administrative/recordkeeping fees paid via a revenue‑sharing model.
- Plaintiffs allege WashU failed to replace higher‑cost retail share classes with lower‑cost institutional shares and retained three allegedly imprudent options (TIAA Real Estate Account, CREF Stock Account, TIAA Traditional Annuity).
- District court dismissed both breach‑of‑prudence claims under Rule 12(b)(6); the Eighth Circuit affirmed in part (retention claim) and reversed in part (share‑class/fees claim), remanding for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether WashU breached its ERISA duty of prudence by offering higher‑cost retail share classes instead of institutional shares (failing to negotiate lower fees / mismanaging revenue sharing). | WashU negligently failed to negotiate access to lower‑cost institutional shares and allowed revenue sharing to keep fees unnecessarily high, harming participants. | WashU negotiated under real‑world constraints: some institutional shares wouldn’t cover plan costs via revenue sharing and the plan has shifted into lower‑cost shares as assets grew—a plausible prudent process. | Reversed dismissal: complaint plausibly alleges a flawed process (failure of effort or competence) re: share classes and fees; claim survives pleading stage. |
| Whether retaining three specific options (TIAA Real Estate Account, CREF Stock Account, TIAA Traditional Annuity) breached the duty to monitor/remove imprudent investments. | These options underperformed and/or cost too much; WashU should have removed them. | The options are materially different in structure, strategy, or benefits (direct real estate vs REIT index; variable annuity with lifetime income vs index funds; fixed annuity with guaranteed income) so benchmarks relied on are inadequate. | Affirmed dismissal: plaintiffs failed to plead meaningful benchmarks or facts that make retention of each option implausibly prudent. |
| Pleading standard for ERISA prudence claims (process‑focused inquiry). | Allegations of market size, competitiveness, and choice of share classes allow inference that fiduciary process was flawed. | Defendant says contrary inferences (prudent negotiation, evolving improvements) negate claim. | The court reiterates ERISA prudence is process‑focused; circumstantial allegations about choices can suffice at pleading stage; competing inferences resolved for plaintiffs on the fees/share‑class claim. |
Key Cases Cited
- Braden v. Wal‑Mart Stores, Inc., 588 F.3d 585 (8th Cir. 2009) (prudence inquiry focuses on fiduciary process; circumstantial allegations about fund lineup can state a claim)
- Meiners v. Wells Fargo & Co., 898 F.3d 820 (8th Cir. 2018) (plaintiff must plead meaningful benchmark for fund‑by‑fund imprudence claims)
- Tibble v. Edison Int’l, 135 S. Ct. 1823 (2015) (ERISA fiduciary duty includes monitoring and removing imprudent investments)
- Renfro v. Unisys Corp., 671 F.3d 314 (3d Cir. 2011) (defined‑contribution plans may prudently offer funds with differing features, including guaranteed income)
- Divane v. Northwestern Univ., 953 F.3d 980 (7th Cir. 2020) (context: similar suits against universities over 403(b) plan fees and options)
- Sweda v. Univ. of Pa., 923 F.3d 320 (3d Cir. 2019) (context: campus retirement plan fee litigation)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading standard: factual matter must raise plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard and drawing inferences at the motion‑to‑dismiss stage)