Employee Benefit Plans: The 411

Valuable Information on 401ks, Pensions, ESOPs, Form 5500 Preparation + More

Supreme Court Rules that Plan Sponsors Have Duty to Monitor Investment Options

On May 18, 2015, the U.S. Supreme Court issued its opinion in the Tibble v. Edison Int’l case. In 1999 and 2002, Edison International added 6 retail mutual fund options to the available investment options for the company’s 401(k) plan. All 6 mutual funds had virtually identical institutional-class mutual funds that charge lower investment fees. Petitioners had sued Edison International seeking to recover damages incurred from the higher fees charged by the retail investment options.

The Supreme Court’s decision stated that, under trust law, a fiduciary has a continuing duty to review the investment options and to remove imprudent options. Therefore, the statute of limitations did not apply to the investments added in 1999 and 2002.

This decision should prompt all plan sponsors to evaluate whether they have a sufficient and documented process in place to prove that they have fulfilled their responsibility to review investment options on a continual basis. If you are a plan fiduciary and are wondering if you are fulfilling your responsibilities for reviewing investments, please take the time to read the Department of Labor’s Report of the Working Group on Prudent Investment Process.

By Rex Platt, CPA