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Polsinelli Polsinelli - Employee Benefits and Executive Compensation
         
 

June 2015

 

Supreme Court Reminds Companies to Monitor 401(k) Plan Investments, Sets Parameters for "Regular Review" Requirements

 
 
             
 

For more information about this alert, please contact:

 

Hannah R. DeLuca

816.572.4568

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Meredith A. VanderWilt

214.661.5558

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Employee Benefits and Executive Compensation Leaders:

 

W. Andrew Douglass

Practice Area Chair

312.873.2933

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William P. Sweeney

Practice Area Vice Chair

312.873.3664

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Companies and in-house fiduciaries face increasing scrutiny these days over their 401(k) and other retirement plans. This was underscored again recently by a key Supreme Court ruling. In Tibble v. Edison International, the U.S. Supreme Court held that an employer's duty to monitor its 401(k) plan investment options does not end with the selection of the investments. Rather, employers have an ongoing fiduciary duty to have a "regular review" of their plans' investment funds to ensure that they continue to be appropriate.

Now more than ever, fiduciaries must take steps to ensure they are fulfilling their statutory duties when they select and review the assets in their companies' retirement plans. The Supreme Court's decision in Tibble comes on the heels of the U.S. Department of Labor's recent proposal of new fiduciary rules that would restrict investment advisors to ERISA-covered retirement plans (see prior analysis here). Going forward, we expect the DOL and other agencies, as well as reviewing courts, to be more active in examining alleged fiduciary breaches.

In Tibble, the Court examined the applicability of the general six-year statute of limitations period under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). In particular, the Court addressed whether a breach of fiduciary claim in which the initial investment occurred more than six years ago was time-barred. The Court held that the Ninth Circuit erred in holding that the claim was barred by the statute of limitations, because the appellate court only considered the claim with respect to the initial choice of investment. Applying trust law principles, the Supreme Court stated that plan fiduciaries have an ongoing duty to monitor investments and remove imprudent ones, and that the lower court should have considered such a duty in its ruling. The Supreme Court held that the claim was timely if the alleged fiduciary breach of the ongoing duty to monitor happened within the applicable six-year period. Consequently, the case was remanded back to the Ninth Circuit for additional proceedings consistent with the Supreme Court's ruling.

For More Information

Please contact the authors or any member of Polsinelli's Employee Benefits and Executive Compensation practice group should you have any concerns regarding the possible impact of the Supreme Court's ruling on your company's fiduciary governance and review procedures.

 
             

             
 

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