Yes Virginia, There is a Duty to Monitor Retirement Plan Investments re: Supreme Court Decision Tibble v. Edison Int’l
In a recent unanimous ruling the U.S. Supreme Court confirmed what most retirement plan professionals already knew: ERISA requires plan investment fiduciaries to monitor investments and remove imprudent ones. Surprisingly to some, however, this ruling changes the law in several U.S. federal court jurisdictions, including our own Fourth Circuit (North Carolina, Virginia and surrounding states), as well as the Ninth and Eleventh Circuits.
The facts of the case, Tibble v. Edison Int’l, involved the technical issue of the ERISA’s six-year statute of limitations in a lawsuit against fiduciaries alleging high-cost investment options offered to participants in a 401(k) plan. The Supreme Court rejected the view recently adopted by the three federal circuit courts that lawsuits challenging fees are untimely unless filed within six years of the initial selection of the investment. The Supreme Court held there is a continuing duty to monitor plan investment options, separate and apart from the duty to exercise prudence in the initial selection of an investment, and a case can be filed within the six-year window following a breach of that continuing duty. The practical implication of this rolling six-year window of liability is that plan investment fiduciaries are not completely protected by the statute of limitations from breach of fiduciary duty claims relating to an investment option until six years after the option has been removed from the plan.
The Supreme Court’s opinion did not indicate exactly what the duty to monitor investments requires of plan fiduciaries, directing the lower courts to sort out the details. However, the opinion relied on some long-standing, basic fiduciary law to support its holding, which provides a great deal of comfort to those already relying on best practices developed from this body of law. The Supreme Court’s reliance on that body of law also almost certainly means the continuing duty to monitor plan investments is not limited to fee issues. Critical actions toward fulfilling this duty should include establishing, following and documenting an ongoing process to evaluate plan investments. For retirement plan sponsors who have not yet embraced this responsibility, this Supreme Court case should remove any lingering doubts that prudent, ongoing action is required.