May 21, 2015

Supreme Court Confirms Duty to Monitor Investment Selections

On May 18, 2015, in Tibble v. Edison International, the U.S. Supreme Court unanimously held that under the Employee Retirement Income Security Act (ERISA), investment fiduciaries have a duty to continuously monitor previously chosen investments and remove those that are no longer prudent. The case involved Edison’s participant-directed §401(k) plan, and the primary issue was whether the plan’s investment fiduciaries had breached their duties by retaining mutual funds that charged retail fees when essentially identical funds charging lower institutional fees were available. The lower court had focused on the duty of prudent selection of investments, and found in favor of Edison because the six-year statute of limitations on the investment selection had closed. The Supreme Court found that the duty in question was the separate duty to monitor previously selected investments, and sent the case back to the lower court to determine whether the plan’s fiduciaries had breached the duty to monitor. Although ERISA’s fiduciary provisions do not apply to public sector plans with participant-directed investments, the Supreme Court’s finding of a duty to monitor previously selected investments is guidance that public sector plans should take note of.

If you have any questions about the Tibble decision, please contact your Segal consultant or send us a note.

On May 18, 2015, in Tibble v. Edison International, the U.S. Supreme Court unanimously held that under the Employee Retirement Income Security Act (ERISA), investment fiduciaries have a duty to continuously monitor previously chosen investments and remove those that are no longer prudent. The case involved Edison’s participant-directed §401(k) plan, and the primary issue was whether the plan’s investment fiduciaries had breached their duties by retaining mutual funds that charged retail fees when essentially identical funds charging lower institutional fees were available. The lower court had focused on the duty of prudent selection of investments and found in favor of Edison because the six-year statute of limitations on the investment selection had closed. The Supreme Court found that the duty in question was the separate duty to monitor previously selected investments and sent the case back to the lower court to determine whether the plan’s fiduciaries had breached the duty to monitor.

If you have any questions about the Tibble decision, please contact your Segal consultant or send us a note.

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Serena Simons

Serena Simons

SVP, National Retirement Compliance Practice Leader