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Dawn Murphy-Johnson Quoted on Implications of Cornell Retirement Plan Win in Bloomberg Law

"Cornell Retirement Plan Win Adds to Growing ERISA Circuit Split"

Bloomberg Law

Dawn Murphy-Johnson was quoted in Bloomberg Law on Cornell University's recent appellate victory in a retirement-plan-mismanagement case that has added to the growing debate over whether routine contracts between employers and retirement plan service providers can be challenged under the Employee Retirement Income Security Act (ERISA) as "prohibited transactions." The U.S. Court of Appeals for the Second Circuit's November 14 decision favoring Cornell answered a question of first impression in the circuit: what must plaintiffs plausibly allege to state a claim that a retirement plan's arrangement with a service provider violates ERISA's provisions prohibiting transactions between plans and interested parties. According to the Second Circuit, a prohibited-transaction claim based on money paid to a retirement plan service provider must include allegations that the services were unnecessary or that the compensation was unreasonable. "Under the Second Circuit's construct, the defendant has the ultimate burden of persuasion as to the exemptions, but the plaintiff must raise the exemptions in their complaint," Murphy-Johnson said. According to Murphy-Johnson the Second Circuit's analysis may be on a "collision course" with the Department of Labor's (DOL) "long-held doctrine" that all transactions between a plan and a party in interest are prohibited and the burden is on the defendant to affirmatively show that a statutory exemption applies.