In a unanimous decision, the U.S. Supreme Court in Tibble v. Edison International held that plan fiduciaries owe an ongoing duty to review plan investments periodically to ensure compliance with their obligations under the Employee Retirement Income Security Act (ERISA). In doing so, the Court reversed the Ninth Circuit's holding that the statute of limitations for challenges to the continued offering of an investment option begins running only at the time the investment option is selected by an ERISA plan fiduciary (absent a change in circumstances), but stopped short of defining any specific obligations apart from a "continuing duty to monitor investments and remove imprudent ones."1 The decision reinforces the importance of maintaining and documenting a formal program for review of all investment options under an individual account plan.
Factual and Procedural Background
The respondent company sponsored and maintained a 401(k) savings plan ("the Plan"). The Plan held $3.8 billion in assets for the approximately 20,000 participants in the Plan.2 In 2007, several individual participants in the Plan brought a class-action suit, alleging that the Plan's fiduciaries violated their duty of prudence under ERISA by offering numerous mutual funds as investment options, because they had high hidden fees and expenses. Plaintiffs argued that the Plan would have been able to obtain virtually identical, but lower-priced, mutual funds.3
ERISA requires that plan fiduciaries discharge their duties
with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.4
But under a separate provision within ERISA, an action for breach of fiduciary duty must be brought within six years of:
the date of the last action...
