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By Iris Tilley
On May 18, 2015, the U.S. Supreme Court handed down a unanimous decision that effectively expands the time period during which a 401(k) plan participant may file suit for certain ERISA violations.
In Tibble v. Edison International, the Court considered the Ninth Circuit Court of Appeal’s decision to dismiss a case as untimely. The plaintiffs in Tibble sought to recover for an alleged failure by the plan trustees of the Edison International 401(k) plan (“Edison”) to sufficiently monitor plan investments. As alleged by the Tibble plaintiffs, Edison had failed to remove certain high-fee investment offerings from the plan’s investment line up despite the fact that the same investments were available at a lower fee elsewhere.
The Ninth Circuit determined that the plaintiffs’ claim was untimely because the plaintiffs brought suit more than six years after the investment offerings were added to the plan. Rejecting the Ninth Circuit’s reasoning, the Supreme Court found that the plaintiffs’ suit was not time barred because the plan trustees had an ongoing duty to monitor investments, extending beyond the date the investments were first selected. This ongoing duty can give rise to an ERISA fiduciary action, so the statute of limitations had not in fact run in the Tibble case.
The Supreme Court did not make a ruling as to whether the plan trustees in fact breached their fiduciary duties and instead remanded the case for the Ninth Circuit to make this determination. Nonetheless, the Supreme Court’s ruling makes it decidedly easier for plan participants to bring suit against plan trustees and acts as a good reminder that ERISA plan fiduciaries must actively monitor plan investments on an ongoing basis.
This decision comes on the heels of proposed DOL regulations that would broaden the definition of “fiduciary” to include investment advisors in some contexts.
Companies sponsoring retirement plans, like 401(k) plans, should take the Supreme Court’s decisions and the DOL’s movement on fiduciary duties as a reminder to continually monitor their own plans. While good plan service providers, like investment advisors, third-party administrators, and attorneys are essential to ensuring plan compliance, these third parties cannot entirely absolve a plan sponsor of its fiduciary obligations under the Employee Retirement Income Security Act (ERISA). As such, employers must remain actively engaged in their retirement plan administration to ensure continued compliance and mitigate the risk of a fiduciary suit under ERISA. As always, we are happy to answer any questions that you may have along the way.