After nine years, Tibble v. Edison Int’l is finally over (9th Cir., No. 10-56406, 4/13/2016). Has this changed the way retirement plan fiduciaries monitor plan fees?
Michael Richman of Morgan Lewis told Bloomberg BNA that, “The recent 9th Circuit decision doesn’t change the previous lessons of Tibble with regard to how to monitor plan investments. The earlier decisions highlighted the importance of monitoring plan investments, including their associated fees, on an ongoing basis, regardless of how long the investments have been part of the plan’s line-up, so that plan fiduciaries should continue to do what they have been doing in this regard.”
Bloomberg BNA’s Pension Plan Investment Administration Guide has a checklist for defined contribution plan fiduciaries to follow regarding plan fees and investments.
On April 13 the U.S. Court of Appeals for the Ninth Circuit held that the Edison International workers who sued the company over its 401(k) fees forfeited their claim that plan fiduciaries failed to monitor these fees. See related story, Edison Workers Forfeited Monitoring Claim, 9th Cir. Rules.
Along the way, the case went up to the Supreme Court, where the justices ruled in a unanimous decision in May 2015 that plan fiduciaries have a continuing duty to monitor plan investments. “A 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.” In barring 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. Many of these cases involved allegations of excessive fees.
However, the Ninth Circuit subsequently concluded that the Edison workers waived their claim of improper plan monitoring by failing to raise it prior to their petition for Supreme Court review.
Now that Tibble is finally over, what else will impact fiduciary monitoring going forward?
Richman said, “One important development is the release of the new fiduciary investment advice/conflict of interest rule by the DOL on April 6. This rule substantially revises the test on what is `investment advice’ that makes one a fiduciary under ERISA and the Internal Revenue Code prohibited transaction rules, with significant implications that will need to be considered by plan and IRA advisors and plan services providers, as well as plan sponsors, by the new rule’s effective date of April 10, 2017.”
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