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SCOTUS Rules on Tibble v. Edison International

On May 18, 2015, the Supreme Court of the United States (SCOTUS) ruled unanimously in favor of the plaintiffs on a key provision in the Tibble v. Edison International class action lawsuit. In defense of its fiduciaries’ actions, Edison International alleged that the retail classes of mutual funds it offered to participants in its 401(k) plan were selected more than 10 years before participants decided to enter into a class action suit against the plan fiduciaries.

Since the investment decisions were more than six years old, Edison purported that these investments fell under ERISA’s statute of limitations clause, so Edison had no further duty to monitor these investments and participants had no claim against the plan fiduciaries for breach of their fiduciary duties, a position which the appeals court had previously upheld.

As a result of SCOTUS’ decision, it is now clear that the duty to select investments and the duty to monitor them are separate and distinct, and plan fiduciaries need to continue to monitor plan investments throughout the time they are offered under the plan. What is not clear from SCOTUS’ ruling is the scope of the fiduciary duty to monitor investment options absent significant changes in circumstances.

The remand of the case back to a lower court means plan investment fiduciaries will need to wait for further developments before we receive any additional clarity on this issue. However, it seems clear that plan fiduciaries should continue to follow a regular and recurring investment review process laid out under a comprehensive fiduciary best practices program.

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Comment   |  4 years, 10 months ago from Houston, TX