In May 2015 the Supreme Court ruled in Tibble v. Edison International that 1) there is an ongoing fiduciary duty to monitor plan investments, and 2) the statute of limitations only starts to run once a fiduciary breach is corrected, as opposed to when the fiduciary breach first occurs. In their ruling, the Supreme Court remanded the case back to the Ninth Circuit Court of Appeals for findings of fact and to apply the law.
The plan participants (Tibble and the other plaintiffs) originally contended that Edison plan fiduciaries breached their duty by offering higher priced mutual funds to the plan when substantially similar funds were available for a lower price. At the district court and Court of Appeals level, the plan participants argued that a significant change in circumstances should have prompted the plan fiduciaries to review the funds and remove any faulty investments such as the higher priced mutual funds. However, the nature of the plaintiff’s arguments expanded.
The plan participants argued before the Supreme Court that there was an ongoing duty to monitor plan investments. This argument, although previously available to the participants, was never made at the district or appellate court levels.
Upon remand from the Supreme Court, in April 2016 the Ninth Circuit ruled in favor of the plan Sponsor, Edison, and that the plaintiffs “forfeited such ongoing-duty-to-monitor argument by failing to raise it either before the district court or in their initial appeal.” The ongoing-duty-to-monitor argument will likely never be missed by a plaintiff’s attorney again.
For Tibble and other Edison International plan participants, there was no victory, and no restoration of fees or lost earnings. No penalties were paid by the plan sponsor or the fiduciaries of the plan. However, the plan sponsor dedicated significant time and resources, and paid outside counsel meaningful dollars to defend the plan fiduciaries.
Though the Ninth Circuit ruled for Edison, it is vital to note that this case was decided on a technicality. Plan sponsors should heed the warnings generated by Tibble v. Edison and certainly review all of their fiduciary responsibilities including examination of the underlying plan funds to ensure that any overpriced or underperforming investments are removed immediately.
Plan and law compliance, operational oversight, and fiduciary responsibilities are closely linked and often times overlap. Plans are run more efficiently and lawsuits and challenges are more easily defended or avoided if proper fiduciary and operational procedures, oversight, controls, and reviews are put into place.
To help maintain compliant retirement plans, there are four questions every retirement plan committee should address:
- What internal and external, fiduciary and non-fiduciary roles are in place for our qualified retirement plans?
- What operational and fiduciary systems, contracts, and safeguards are in place?
- Have independent third parties reviewed the systems, contracts, and safeguards?
- What is the frequency of the reviews of our qualified retirement plans?
