Last month, the United States Supreme Court ruled unanimously in Tibble v. Edison International that retirement plan fiduciaries have an ongoing duty to monitor plan investments. The ruling came in a case involving challenges to plan investment decisions made more than six years before suit was filed. The lower courts had ruled some claims were barred by the statute of limitations.
In a 2007 lawsuit, participants in the Edison 401(k) Savings Plan sued various Edison International entities and the plan fiduciaries alleging numerous claims under ERISA. The claims included that the plan fiduciaries should have offered identical lower-cost institutional shares instead of the more expensive investment options selected in 1999 and 2002.
The Supreme Court reversed the lower courts’ ruling that ERISA’s six-year limitations period barred plaintiff’s claims that the 1999 mutual fund investments were imprudent. Although the Supreme Court stated that the lower court correctly asked whether the last action which constituted a part of the breach or violation of the duty of prudence occurred within the relevant 6-year period, the lower court was incorrect to focus on the act of designating an investment for plan inclusion to start the six year period. Instead, the lower courts should have recognized that a fiduciary is required to conduct a regular review of its investments with the nature and timing of the review contingent on the circumstances. The case highlights the need for retirement plan fiduciaries to monitor plan investments pursuant to written procedures.