Following Tibble, Attorneys Discuss Scope of Monitoring Duty, Best Practices


Open questions remain after this month's U.S. Supreme Court decision reaffirming 401(k) plan fiduciaries' ongoing duty to monitor plan investments, attorneys said during a webinar discussing the case.

On May 18, the high court made it easier for 401(k) plan participants to bring lawsuits challenging high-cost investment options that have been in the plan for years by holding that such suits can be based on plan fiduciaries' ongoing duty to monitor those investments (Tibble v. Edison Int'l, 2015 BL 152750, U.S., No. 13-550, 5/18/15). 

However, this unanimous opinion “stated only the obvious” and didn't answer important questions, such as how often fiduciaries must engage in the monitoring process, said Nancy G. Ross, a partner in Mayer Brown LLP's Chicago office.

Ross and her colleague, Brian D. Netter of the firm's Washington office, discussed open questions and best practices following Tibble during a May 27 webinar sponsored by Mayer Brown. The webinar was titled Tibble v. Edison International: What It Means for Plan Fiduciaries.

‘Obvious' Opinion Leaves Questions

Ross emphasized that this opinion wasn't a “game-changer,” because most fiduciaries of sophisticated 401(k) plans already employ prudent monitoring processes that likely would withstand judicial scrutiny.

“I see this as a reminder, not a wake-up call,” Ross said.

However, both Ross and Netter agreed that the decision didn't address several important questions about what the fiduciary duty to monitor might entail.

According to Netter, it remains to be seen how the duty to prudently monitor previously selected investment options differs from the duty to prudently select those options in the first place. Although the monitoring duty theoretically should require less of fiduciaries than the duty to prudently select investments, Netter said, the Supreme Court didn't squarely address this distinction.

Ross added that the Tibble decision also failed to address exactly how often a prudent fiduciary must engage in investment monitoring activities.

Annual monitoring may be appropriate for some plans, Ross said, while monitoring every six months may make more sense for others.

“We have no crystal ball as to what type of timing should be employed,” she said. “You have to look at your own plan and see what makes sense.”

Excerpted from a story that ran in Pension & Benefits Daily (05/28/2015).

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