Employment Litigation · Primary-source case analysis

Cunningham: ERISA Transaction Exemptions Are Affirmative Defenses

By Aneeta Mishra and Timothy Chan

Published September 8, 2026

Cornell retirement-plan participants alleged that fiduciaries caused their plans to purchase recordkeeping services from parties in interest. The pleading dispute concerned whether participants also had to allege that the services were unnecessary or unreasonably compensated.

Section 1106 supplies the claim elements

A plaintiff must plausibly allege that a fiduciary caused a plan to engage in a transaction the fiduciary knew or should have known furnished goods, services, or facilities between the plan and a party in interest.

Section 1108 is structurally separate

Congress placed the exemptions in a distinct section and labeled them exemptions from prohibited transactions. That structure follows the ordinary form of an affirmative defense rather than adding negative elements to the plaintiff’s claim.

The fiduciary bears the exemption burden

A defendant relying on the necessary-services and reasonable-compensation exemption must plead and prove it. Requiring a plaintiff to negate the statute’s numerous exemptions at the outset would disregard the text and ordinary pleading rules.

Courts retain screening tools

The unanimous Court reversed dismissal but noted that standing, Rule 7 replies, tailored discovery, Rule 11, and fee shifting can address meritless suits. The decision assigns burdens; it does not establish that the challenged fees were excessive or that liability was proved.

Key takeaways

• Plead the three elements in section 1106(a)(1)(C).
• Treat section 1108 exemptions as defenses rather than negative claim elements.
• Document necessity and reasonable compensation when relying on the service-provider exemption.
• Separate pleading sufficiency from standing and ultimate liability.