Summary of the Supreme Court’s Holding in Tibble v. Edison

Posted on May 26, 2015

On May 18th, the Supreme Court delivered its decision in Tibble v. Edison, which involves the question as to whether a plan fiduciary has an ongoing duty to monitor a plan’s investments.

The basic facts of the case are as follows:

  • The Plaintiffs claimed that of the 40 funds offered, six funds were retail share classes, despite there being an institutional share class available with lower investment expenses.
  • The Defendants claimed that the 6-year statute of limitations has expired because the funds were added to the plan more than six years ago.   Therefore, there is not a continual fiduciary duty to monitor the investments.
  • Plaintiffs claimed there is an ongoing duty to monitor the plan’s investments and the statute of limitations does not apply.

The Supreme Court held that the 9th Circuit erred in applying the 6-year statute of limitations to a breach of fiduciary duty claim “without considering the contours of the alleged breach of fiduciary duty.”  The Court’s reasoning is based on an examination of the history of ERISA’s fiduciary duty, which the Court explained is derived from the common law of trusts.  This duty “provides that a trustee has a continuing duty – separate and apart from the duty to exercise prudence in selecting investments at the outset – to monitor, and remove imprudent trust investments.”
The bottom line for plan fiduciaries is regardless of how long an investment has been on their plan’s platform, there is a continuing fiduciary duty to monitor all investments.  This serves as another reminder of the importance of having a systematic investment review process that is done on an ongoing basis.

If you would like to learn more about how this decision pertains to your current process for monitoring investments, contact our ERISA Services Team or call 800-234.9584.

 

PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.

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