Prohibited Transaction Claims and Exemptions Post-Cunningham v. Cornell University

BARBRI

Pleading Standards; Statutory, Class, and Individual Exemption Rules; Current Issues and Challenges

This CLE course will provide ERISA counsel guidance on the prohibited transactions rules and available exemptions under ERISA post-Cunningham v. Cornell University, with an emphasis on application of these rules. The panel will discuss key areas of focus stemming from the ruling in Cunningham; critical provisions under ERISA and the Internal Revenue Code (IRC); applicable rules and procedures for statutory, class, and individual exemptions; fiduciary liability; and other critical issues for using prohibited transactions exemptions under ERISA.

Description

Section 406 of ERISA prohibits certain transactions between employee benefit plans and "parties in interest," requiring strict adherence by fiduciaries and participants. IRC 4975 may impose an excise tax on transactions involving participation by a "disqualified person." In addition, another category of prohibited transactions involves fiduciary self-dealing and conflicts of interest.

ERISA and the IRC provide specific broad-based statutory exemptions from the prohibited transaction rules. These exemptions apply to anyone who meets the specified requirements. In addition, the DOL issues class and individual exemptions, which are granted only under certain circumstances and after procedural requirements are met.

On Apr. 17, 2025, the U.S. Supreme Court issued its opinion in Cunningham v. Cornell University, resolving the circuit court split on the pleading standard for prohibited transaction claims under ERISA. The Court's ruling has lowered the pleading standards for ERISA claims, allowing plaintiffs to pursue prohibited transaction claims without addressing the statutory or regulatory exemptions that may defeat such claims.

The rules and procedures for obtaining a prohibited transaction exemption under ERISA and the IRC are complex. Employee benefits counsel and fiduciaries must identify transactions for potential violations and plan accordingly for any available exemptions.

Listen as our panel discusses key provisions under ERISA and the IRC, applicable rules and procedures for statutory, class, and individual exemptions, fiduciary liability, and other critical issues for obtaining prohibited transactions exemptions.

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