Whether a plaintiff must plead that an exemption under 29 U.S.C. § 1108(b)(2)(A) does not apply to state a claim for a prohibited transaction under 29 U.S.C. § 1106. Specifically, the Court addressed whether the "reasonable compensation" and "necessity" requirements of § 1108(b)(2)(A) are elements of the claim or affirmative defenses. This determines if a plaintiff must disprove these exemptions at the pleading stage to survive a motion to dismiss.

• The plans engaged in prohibited transactions by paying recordkeeping fees to TIAA and Fidelity, who are "parties in interest" under 29 U.S.C. § 1002(14).
• These service providers were paid substantially more than reasonable recordkeeping fees.
• Because the furnishing of services between a plan and a party in interest is categorically barred by 29 U.S.C. § 1106(a)(1)(C), the burden is on the fiduciaries to prove an exemption applies.

• The phrase "[e]xcept as provided in section 1108" in § 1106(a) incorporates the exemptions into the definition of a prohibited transaction.
• Plaintiffs must therefore plead that a transaction was "unnecessary or involved unreasonable compensation" to survive a motion to dismiss, relying on *United States v. Cook*.
• Requiring only barebones allegations would lead to an avalanche of meritless litigation and costly discovery for fiduciaries who routinely employ necessary service providers.

• The Court held that a plaintiff need only plausibly allege the three elements of 29 U.S.C. § 1106(a)(1)(C): (1) causing a plan to engage in a transaction, (2) knowledge that it constitutes furnishing goods, services, or facilities, and (3) that the transaction is between the plan and a party in interest.
• The Court reasoned that the bar in § 1106(a)(1)(C) is categorical and does not remove transactions based on necessity or reasonable compensation.
• Relying on *Meacham v. Knolls Atomic Power Laboratory*, the Court determined that when exemptions are laid out apart from prohibitions and refer to the prohibited conduct, they constitute "affirmative defenses."
• The Court invoked *FTC v. Morton Salt Co.* to note that the burden of proving a special exception generally rests on the party claiming its benefits.
• Citing *Taylor v. Sturgell* and *Perry v. Merit Systems Protection Bd.*, the Court affirmed that affirmative defenses are the responsibility of the defendant to plead and prove, not the plaintiff to negate in her pleading.
• The Court rejected reliance on *United States v. Cook*, noting it established a "rule of criminal pleading" based on constitutional notice requirements (*United States v. Reese*; *United States v. Cruikshank*) that do not apply in civil contexts; further, *Dixon v. United States* confirms pleadings need not negative exceptions made by distinct clauses.
• To prevent meritless litigation, the Court noted district courts can use tools such as requiring replies under Federal Rule of Civil Procedure 7(a) (*Crawford-El v. Britton*), dismissing for lack of concrete injury under Article III (*Thole v. U. S. Bank N. A.*), and ordering cost shifting under 29 U.S.C. § 1132(g)(1).