While most of the country was focused on decisions that would impact the Affordable Care Act as well as marriage equality, The Supreme Court’s unanimous ruling in Tibble vs. Edison International changes the amount of fiduciary responsibility that is expected from plan administrators.
The basic framework of the decision asserts “that fiduciaries who select investment options for 401(k) plans have a continuing duty under ERISA to monitor their selections and remove imprudent options.”
For many administrators in the industry, that statement seems fairly obvious; good plan advisors have an obligation to perform a routine evaluation of their investment choices and must make choices that will benefit those covered by the plan.
The piece of the decision that caught the eye of plan administrators nationwide was the justice’s further assertion that prior rulings from the court had “erred by applying a 6-year statutory bar based solely on the initial selection of the three funds without considering the contours of the alleged breach of fiduciary duty.” This has plan administrators wondering what will now be considered sufficient due diligence when it comes to monitoring and removing investment options. Will this decision “reset” ERISA’s six-year review clock?
The long-term implications of the decision are unclear, and some legal analysts are critical that the decision is not that practically applicable and signals a new era of judicial involvement in plan administration.
– A regular review of investments is required with the nature and timing contingent on the circumstances
– A systematic review of investments must occur at regular intervals
– An investment review is to be done in a manner that is reasonable and appropriate to the particular investments, courses of action and strategies involved
– If investments are inappropriate, they must be disposed of within a reasonable time
As plan administrators, The Robin S. Weingast & Associates team takes fiduciary responsibility seriously. Our goal is to be thorough in our review process while being nimble enough to respond what’s happening in real-time. We have the experience and expertise to strike the perfect balance between being fiscally responsible, timely, and cognizant of our client’s business goals.
If you have questions about what this decision means for your plan, please contact the Robin S. Weingast & Associates team today.