Supreme Court made it easier for 401(k) plan participants to bring lawsuits
challenging high-cost investment options added to the plan more than six years
before a lawsuit was filed.
unanimous ruling by Justice Stephen G. Breyer on May 18, the court rejected the
view recently adopted by three federal appellate courts, which found lawsuits
challenging plan fees to be untimely under the Employee Retirement Income
Security Act when they involved investments added to plans more than six years
before a given lawsuit (Tibble v. Edison Int'l,
U.S., No. 13-550,
to Breyer's majority opinion, courts can't dismiss these challenges without
first considering whether plan fiduciaries fulfilled their duty to monitor
those investments during the relevant six-year window.
plaintiff may allege that a fiduciary breached the duty of prudence by failing
to properly monitor investments and remove imprudent ones,” the court held. “In
such a case, so long as the alleged breach of the continuing duty occurred
within six years of suit, the claim is timely.”
the court explicitly declined to articulate what this continuing duty to
monitor looks like, leaving this question for lower courts.
lower courts from rejecting outright any lawsuit based on older investment
options, the Supreme Court removed a huge roadblock that previously derailed
many plan fee challenges brought under ERISA.
particular, the U.S. Courts of Appeals for the Fourth, Ninth and Eleventh
Circuits have all issued recent opinions protecting plan fiduciaries from these
types of claims. In these rulings, the courts found that plan participants
challenged the initial selection of high-cost funds—which occurred outside
ERISA's statute of limitations—rather than any subsequent failure to monitor or
remove the funds that might have occurred within the six-year window (David
, 704 F.3d 327, (4th Cir. 2013); Tibble v. Edison Int'l
711 F.3d 1061, (9th Cir. 2013); Fuller v. SunTrust Banks, Inc.
, 744 F.3d
685, (11th Cir. 2014)).
plaintiff- and defense-side attorneys expressed little surprise at the Supreme
Court's decision, calling it “what everyone expected.”
participants' attorney, Jerome J. Schlichter of Schlichter, Bogard & Denton LLP in St. Louis, praised the court's
ruling in a May 18 press release, saying, “On behalf of Edison employees and
all Americans who rely on 401(k)s for their retirement, we are very pleased
with this historic and landmark, unanimous decision by the Supreme Court. Going
forward, this decision will be of great significance for American workers and
retirees for generations to come, as the 401(k) plan has become America's
Porter, a plaintiff-side ERISA attorney and partner with Bailey & Glasser
LLP in Washington, told Bloomberg BNA that the court's ruling was “what
everyone expected” and “what almost everyone knew the law to be.”
said he was glad that the ruling was unanimous, pointing out that the court's
recent decision in Fifth Third Bancorp v. Dudenhoeffer
, 134 S.Ct. 2459,
(U.S. 2014) was also a unanimous ERISA ruling “sweeping away prevailing circuit
law in favor of beneficiaries.”
Fleckner, a defense-side ERISA attorney and partner in Goodwin Procter LLP's
Boston office, agreed that the opinion wasn't “entirely surprising,” although
he expressed some surprise that the justices declined to elaborate on what the
fiduciary duty to monitor might involve.
really don't provide guidance to the lower courts as to what that duty
entails,” Fleckner told Bloomberg BNA.
“Maybe I shouldn't be surprised by that, because the record wasn't as
developed on that particular point as the justices seemed to want.”
Oringer, a partner in Dechert LLP's New York office who represents plan
sponsors and fiduciaries, also found the decision to be in line with
“I am not
surprised that the Supreme Court has effectively preserved a six-year period
for bringing claims for a failure to monitor adequately,” Oringer told
Bloomberg BNA. “To me, the only real question was whether the court would
impose a requirement that there be some kind of factual change within the
six-year period, but I am not surprised that they ultimately did not impose a
condition like that. The court did clearly confirm a duty to monitor regarding
fund selections.”Excerpted from a story
that ran in Pension & Benefits Daily (05/18/2015).
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