This week, the Supreme Court confirmed that plan fiduciaries have a fiduciary duty to continually review their plan investments, including existing or continuing investments.
Background. In Tibble v. Edison International, participants in Edison International’s 401(k) plan filed a lawsuit against the plan’s fiduciaries, alleging they breached their fiduciary duties by offering retail-class mutual fund shares when less expensive institutional class shares of the same funds were available.
The lower courts agreed with the beneficiaries that the plan fiduciaries breached their fiduciary duty with respect to the 3 mutual funds initially offered in 2002. However, the lower courts concluded that the beneficiaries waited too long to sue the plan fiduciaries with respect to the 3 mutual funds initially offered in 1999. The lower courts ruled that only the initial selection of the funds, and not the decision to retain the funds, was actionable. Continuing to make those funds available was not an on-going breach.
Supreme Court Decision. The Supreme Court reversed the lower courts and held that the plan fiduciaries’ duties with respect to investment fund offerings extended beyond their initial selection. Plan fiduciaries are responsible for continually reviewing the appropriateness of all plan investments – not just evaluating them at the time they are first added to the plan.
Next Steps. The Supreme Court has significantly broadened the time frame for participants to file suit over improper investment fund monitoring. The case is a reminder for plan fiduciaries to regularly monitor all of their plan investments and carefully document that a prudent process is being followed.
Contact Information. For more information please contact Don Mazursky (404.888.8840), Randall Constantine (404.888.8877), David Putnal (404.888.8836), Toby Walls (404.888.8870) or Emily Friedman (404.888.8871).