Based on arguments heard this week at the Supreme Court in Tibble v. Edison International, retirement plan fiduciaries can stay the course when it comes to monitoring the investment funds in their plans.
Jamie Fleckner, a partner in and chair of Goodwin Procters ERISA litigation practice in Boston, who attended the oral arguments at the Supreme Court, says there was little in yesterdays proceedings that suggested any different course of action for fiduciaries beyond what theyre already doing.
The plaintiffs in the case contend their ERISA plan fiduciaries breached their duty of prudence by offering higher-cost retail-class mutual funds to 401(k) plan participants, even though identical lower-cost institutional-class mutual funds were available.
And even though the question before the Supreme Court dealt with ERISAs six-year statute of limitations some of the mutual funds that had been added to the Edison plans line-up were added more than six years before the plaintiffs brought their suit and lower courts ruled the fiduciaries decision to use those funds was made outside of ERISAs statute of limitations period so the plaintiffs could not sue with respect to those higher cost funds the Justices appeared more concerned about a fiduciarys duty to monitor a plans investments, says Fleckner.
A good portion of the argument focused on the question of what a fiduciary should be looking at when a fiduciary monitors plan investments should it be looking at fees, performance, portfolio manager composition, and what would be the standards that would govern fiduciaries ongoing monitoring obligations, he says.
That line of questioning raises the potential the Supreme Court could issue guiding principles for retirement plan fiduciaries to follow, although Fleckner suspects the court wont release a new set of standards. I suspect that whatever the Supreme Court decides, it wont alter the calculations that fiduciaries utilize when theyre monitoring investments, he says.
The Supreme Court is expected to issue its decision before the end of its current term in June.
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