PLANSPONSOR - December 2021 - January 2022 - 7

service provider arrangement, you need
to make sure your providers are reputable,
that they know what they're doing
and that they have, for example, good
cybersecurity policies. And you need to
know how your providers are planning to
operate and who is doing what.
PS: Let's say an issue has arisen
and an error was made. Does the
employer's liability vary significantly
depending on whether the
mistake was made by someone to
whom the employer gave discretion
or if, on the other hand, it
commits a fiduciary breach itself?
Turley: Let's make up an example and
assume, say, that a plan sponsor picked
a pooled plan provider [PPP] and joined a
PEP in which the adviser serving that PEP
chose investments with excessive fees-
funds that had high revenue-sharing
arrangements that didn't adjust for the
plan's growing size-and the PPP didn't
do anything to address that.
The first step in such litigation would
be proving that the PPP violated its fiduciary
duty. Once that's done, it becomes
a potential liability for the plan sponsor,
because, if the PPP committed a fiduciary
breach and you failed to know that it was
paying excessive fees and did nothing
to address this, then you are liable. The
regulations have joint and several liability,
meaning that damages will be sought
according to who has the money to pay
and who has the insurance to pay.
PS: What could ease that concern
from the perspective of insurers?
Perhaps precedents that reduce
the number of cases that get past
the motion to dismiss stage?
Turley: One thing that could help is the
decision that is slated for issuance by the
Supreme Court in 2022 regarding Northwestern
University's excessive fee case-
that is, a high-level case that demonstrates
what it takes to allege sufficient facts to
demonstrate liability in a fiduciary excess
fee case.
More From Washington
And the Courts
New Proposed
Money Market Rules
The Securities and Exchange Commission
(SEC) has voted to propose amendments
to certain rules that govern money market
funds under the Investment Company
Act of 1940.
The agency notes that, in March
2020, growing economic concerns about
the impact of the COVID-19 pandemic
led investors to reallocate their assets into
cash and short-term government securities.
The market fall sparked by fears
of the pandemic started that March 9,
with a record-setting 7.79% drop in the
Dow Jones Industrial Average. Two more
record-setting days followed-a 9.99%
dive on March 12 and a 12.93% plunge on
March 16 for the Dow.
As a result of the market drops, prime
and tax-exempt money market funds,
particularly institutional funds, experienced
large outflows, which contributed
to stress on short-term funding markets.
The SEC says its proposed amendments
are designed, in part, to address concerns
about prime and tax-exempt money
market funds highlighted by these events.
The SEC says the proposed amendments
would increase liquidity requirements
for money market funds to provide
a more substantial liquidity buffer in the
event of rapid redemptions. The proposed
amendments also would remove provisions
in the current rule permitting a
money market fund to impose liquidity
fees or to suspend redemptions through
a gate when a fund's liquidity drops below
an identified threshold.
To address concerns about redemption
costs and liquidity, the proposal would
require institutional prime and institutional
tax-exempt money market funds
to implement swing pricing policies and
procedures that would call on redeeming
investors, under certain circumstances, to
bear the liquidity costs of their redemptions.
In addition, the proposal would
amend certain reporting requirements
to improve the availability of information
about money market funds and enhance
the SEC's monitoring and analysis of
these funds.
SCOTUS Hears
University ERISA Case
In early December, the U.S. Supreme
Court (SCOTUS) heard oral arguments in
an Employee Retirement Income Security
Act (ERISA) excessive fee lawsuit known
as Hughes v. Northwestern University. The
question before the high court is whether
participants in a defined contribution
(DC) ERISA plan stated a plausible claim
for relief against plan fiduciaries for
breach of the duty of prudence by alleging
that the fiduciaries caused the participants
to pay investment management
and administrative fees higher than those
available for other materially identical
investment products or services.
Prior to the Supreme Court agreeing
to take up the case, U.S. federal government
attorneys asked the court to grant a
petition for a writ of certiorari requested
by participants of two Northwestern
University 403(b) retirement plans. A
writ of certiorari is a request that the
Supreme Court order a lower court to
send up the record of the case for review.
In their writ, the attorneys said the plaintiffs
state at least two plausible claims for
breach of ERISA's duty of prudence. They
argued that the 7th U.S. Circuit Court of
Appeals' decision in favor of the university
is incorrect and conflicts with decisions
made by the 3rd and 8th Circuits in
similar cases.
Following the oral arguments, PLANSPONSOR
spoke with two ERISA attorneys
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