A group of current and former participants in two ERISA retirement plans sued the sponsoring employer and other plan fiduciaries, asserting that the plans engaged in prohibited transactions and paid more than reasonable fees for plan recordkeeping. (As background, ERISA § 406(a) prohibits transactions between plans and parties in interest, including plan service providers. ERISA § 408(b) provides exemptions for certain transactions, including reasonable arrangements for necessary plan operational services.) The Second Circuit ruled in favor of the plan fiduciaries without a trial, explaining that it was not enough for the participants to allege the existence of a prohibited transaction; they also needed to address the exemptions by plausibly alleging that the services were unnecessary or involved unreasonable compensation, which they failed to do. The participants appealed to the U.S. Supreme Court.
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