Courts Scrutinize ERISA Fiduciary Process: Are You Prepared?

For retirement plan fiduciaries, the most important asset in the room may not be the lowest-cost index fund—it’s the binder of committee minutes.

Over the last decade, a line of US Supreme Court decisions—Tibble v. Edison Int’l (575 U.S. 523 (2015)), Hughes v. Northwestern Univ. (595 U.S. 170 (2022)), and, most recently, Cunningham v. Cornell Univ. (604 U.S. __ (2025) (No. 23-1007))—have pushed fiduciary risk away from a focus on investment results and squarely onto the quality of the process and the paper trail that supports it. Together with regulatory guidance, these cases send a simple message: Under ERISA, prudence is a living, documented process, not a scoreboard of quarterly returns.

A “Prudent Expert”

ERISA’s core fiduciary duty is set out in §404(a)(1)(B): Plan fiduciaries must act with the “care, skill, prudence, and diligence” that a knowledgeable person would use in a similar enterprise. The Supreme Court in Hughes underscored that this duty is context-specific—what is prudent depends on the circumstances when the fiduciary acts, not on how investments later perform.

Regulators have been equally blunt. The IRS, in its guidance on retirement plan fiduciary responsibilities, tells sponsors that fiduciary responsibilities “cover the process used to carry out the plan functions rather than the results.” The guidance adds that an investment doesn’t need to be a “winner” if it was part of a prudent, diversified portfolio—but that fiduciaries should document their decision-making to show what they knew and why they decided at the time.

Plan governance specialists have translated this into a two-part concept of prudence: substantive prudence (having or obtaining the right expertise) and procedural prudence (having and following a robust process, and documenting each step). In practice, that means committees, investment policy statements, regular reviews, benchmarking, and thick meeting minutes—all of which now sit front and center when litigation hits.

Tibble: No More “Set It and Forget It”

The modern focus on process starts with Tibble v. Edison Int’l in 2015. The question before the court was technically about the statute of limitations, but the opinion did something more important: It imported traditional trust law’s continuing duty to monitor into ERISA.

Drawing on trust treatises and the restatement, the court explained that a trustee has an ongoing obligation to review investments at reasonable intervals and remove imprudent ones—separate from the duty to be prudent when the investment is first selected. The trustee can’t assume that an investment suitable at purchase “will remain so indefinitely;" instead, the trustee must systematically consider all investments over time. Tibble v. Edison Int’l, 575 U.S. 523, 529 (2015) (quoting A. Hess, G. Bogert & G. Bogert, Law of Trusts and Trustees §684, at 145–46 (3d ed. 2009)).

For plan committees, Tibble effectively closed the door on a “set it and forget it” mindset. Mutual fund share classes, target-date funds, and stable value options are no longer one-time decisions; they are recurring questions. If performance sags or cheaper institutional share classes become available, a committee that never revisits its lineup—or can’t show that it did—stands on shaky ground.

Hughes: Menu Design and Fee Decisions Under the Microscope

If Tibble created the continuing duty, Hughes v. Northwestern Univ. made clear that the duty applies to the entire menu, not just to a few bad apples.

Participants in Northwestern’s 403(b) plans alleged that fiduciaries offered needlessly expensive recordkeeping arrangements and investment options, including retail share classes where cheaper institutional classes were available. Lower courts dismissed the complaint, in part because the plans also offered low-cost index funds—on the theory that a rich menu of choices effectively cured any imprudent options. 595 U.S. 170 (2022).

The Supreme Court unanimously rejected that “categorical rule.” It held that providing some prudent options doesn’t erase imprudent ones, and that courts must conduct a context-specific inquiry into whether fiduciaries met their duty to monitor and weed out unreasonable fees and poor options, consistent with Tibble’s continuing duty. Hughes, 595 U.S. 170, 173 (2022), and at 177 (quoting Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409, 425 (2014))

On remand, the Seventh Circuit Court of Appeals let key claims over excessive recordkeeping fees and retail share classes proceed, citing allegations that Northwestern paid multiple recordkeepers far more than peer plans and failed to leverage its bargaining power. Hughes v. Northwestern Univ., 63 F.4th 615 (7th Cir. 2023).

Plaintiffs’ lawyers and fiduciary advisers have drawn a clear lesson. One plaintiff-side analysis put it this way: the duty of prudence “requires fiduciaries to follow a standard of conduct, not outcome,” and courts “will not judge pension plans by the results of their investment decisions, but by the process to reach such decisions.”

In other words, Northwestern’s fee levels and fund lineup weren’t judged in isolation; what mattered was whether the committee had a coherent process to evaluate them and a record showing how it made its calls.

Cunningham: Process Becomes Evidence

The Supreme Court’s April 2025 decision in Cunningham v. Cornell Univ. is formally about pleading standards for ERISA prohibited transaction claims. Substantively, it raises the odds that fiduciaries will have to defend their process under the harsh light of discovery.

ERISA §406(a)(1)(C) bars fiduciaries from causing a plan to enter transactions with “parties in interest,” such as recordkeepers, for the furnishing of services. Separate exemptions in §408(b)(2) allow necessary services and “reasonable compensation.”

Cornell employees alleged that their retirement plans paid recordkeepers substantially more than reasonable fees. The Second Circuit dismissed the prohibited-transaction claims, holding that plaintiffs had to plead, at the outset, that no exemption applied. The Supreme Court reversed, holding that §408’s exemptions are affirmative defenses; to state a claim, plaintiffs need only plausibly allege the elements of a prohibited transaction itself. Cunningham v. Cornell Univ., No. 23-1007, slip op. at 8, 17 (U.S. Apr. 17, 2025).

As a practical matter, that means more excessive-fee and recordkeeping suits—especially those framed as prohibited-transaction claims—are likely to survive motions to dismiss and proceed into discovery. Commentators note that the court “lowered the bar” for such claims, even while pointing district courts to procedural tools (such as targeted replies and early consideration of exemptions) to weed out meritless cases.

For fiduciaries, the takeaway isn’t that all vendor relationships are suspect. It is that the reasonableness of those relationships is increasingly going to be tested in real cases with real discovery, where request for proposals, benchmarking reports, and committee minutes become exhibits.

Process Over Performance

Outside the courtroom, regulators and industry guidance now read like a chorus on the same theme.

The IRS emphasizes that fiduciary responsibilities are about how functions are carried out, not whether every investment beats its benchmark. It explicitly recommends documenting the reasoning for decisions “to demonstrate the rationale behind the decision at the time it was made.”

Fiduciary education materials aimed at plan sponsors are equally direct. Fidelity Investments, for example, notes that the duty of prudence “does not require that every fiduciary decision yield the best possible result” and that courts have focused on “the process followed and the documentation available,” distinguishing between substantive and procedural prudence and urging fiduciaries to document that their processes are followed each time.

And in a 2025 ERISA trends survey, retirement consultants summed up what Tibble, Hughes, and Cornell together imply: A well-documented fiduciary process remains the strongest defense against breach claims, even as early dismissals become harder to win.

Overlay the recent case law on top of that guidance, and a pattern emerges: Courts are less willing to short-circuit cases based on broad doctrines (like “the menu had cheap options” or “plaintiffs didn’t negate all exemptions”). Instead, they are pushing disputes deeper into the record—into the emails, minutes, and reports that show what fiduciaries actually did.

“Living, Documented Process”

For plan sponsors, the shift from outcomes to process isn’t a theoretical nuance. It has concrete implications for committees’ daily operations.

A living, documented process generally includes:

• A clearly defined governance structure. Charters that spell out who is a fiduciary, what the committee’s remit is, and how often it meets—backed by regular meetings that actually occur.
• An investment policy statement that is used, not shelved. Courts don’t require an investment policy statement, but once adopted, it becomes part of the yardstick for prudence. Aligning menu construction and changes with that policy—and noting the connection in minutes—helps demonstrate procedural rigor.
• Regular, scheduled monitoring. Following Tibble, committees should calendar systematic reviews of investments and service providers, with materials that show fees, performance, and alternatives.
• Benchmarking and RFPs for key vendors. In the post-Hughes and Cornell world, recordkeeping and other service relationships will be scrutinized. Running periodic RFPs or benchmarking exercises—and retaining the underlying analyses—helps justify fee levels and vendor choices.
• Detailed minutes that capture the “why,” not just the “what.” Courts and regulators are looking for evidence that committees considered relevant factors, asked questions, and made informed trade-offs. Short, perfunctory minutes that simply list decisions can be almost as damaging as no minutes at all.
• A playbook for conflicts and prohibited transactions. With Cornell lowering the bar for prohibited-transaction claims, committees should understand who their “parties in interest” are and how they evaluate reasonableness of compensation—again, with documentation that those evaluations occurred.

None of this guarantees a win in court. A perfectly documented process can still produce decisions a judge or jury dislikes in hindsight. But it is far easier to defend a record that shows a committee wrestling with fees, performance, and vendor trade-offs than one that suggests inertia or rubber-stamping.

Documentation as Risk Capital

The economics of ERISA litigation are stark. Excessive-fee cases can involve tens of thousands of participants and eight-figure settlement exposure. Since Hughes and Cornell, plaintiffs have fewer hurdles to survive early motions, and discovery costs alone can push defendants toward settlement.

In that environment, documentation is a form of risk capital. Committees that can pull a thick, organized file of meeting materials, comparative data, and contemporaneous rationales stand a better chance of obtaining dismissal, summary judgment, or at least negotiating from a position of strength. Those that cannot may find that their biggest vulnerability is not any single fund or fee—but the absence of a living, documented process to explain how they got there.

For fiduciaries, the message from recent Supreme Court case law is clear: You can’t control markets, but you can control your process. And increasingly, that is what the courts are looking at.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Samuel Krause is a partner at Hall Benefits Law.

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