On May 18, 2015, the U.S. Supreme Court issued a unanimous ERISA decision, Tibble v. Edison International, emphasizing that ERISA fiduciaries have an on-going duty to monitor plan investments even if the underlying investment decision was made outside ERISA’s six-year limitations period. In a nutshell, the Edison plan fiduciaries had selected certain retail-class mutual funds for a defined contribution plan even though they had expense rates higher than identical investment-class mutual funds. The plaintiffs complained that it was a breach of fiduciary duty to select the more expensive funds – even those funds that had been selected more than six years earlier. The Ninth Circuit disagreed in part and held that, absent changed circumstances that would have triggered a duty by the fiduciaries to fully review the mutual funds, the clock started ticking on ERISA’s six-year limitations period when the mutual funds were selected.
The Supreme Court essentially dodged the question whether, under a continuing violations theory, the original breach would still be actionable. Instead, the Court focused on general trust principles to point out that plan fiduciaries have an on-going duty to regularly monitor the prudence of the underlying fund options, and this on-going duty to monitor may support plaintiffs’ fiduciary breach claims even though the selection decisions were made more than six years earlier. The Court did not go into a detailed discussion regarding the parameters of this on-going duty to monitor but instead remanded the case back to the Ninth Circuit for further analysis.
Anyone responsible for ERISA plan investments should consider this case a reminder that fiduciary investment decisions – whether prudent or imprudent when made – must be regularly monitored. Further, the Supreme Court’s decision makes clear that, when investments remain in the plan, a recently appointed investment fiduciary cannot necessarily avoid liability by claiming the investment decision was made by someone else or years earlier.