Tag Archives: SCOTUS

U.S. Supreme Court ruling calls attention to the fiduciary duty to monitor 401(k) plan investments

The U.S. Supreme Court unanimously held that, although the initial selection of plan investments occurred beyond ERISA’s six-year statute of limitations, a lawsuit by participants in a 401(k) savings plan may proceed on whether the plan fiduciaries breached their continuing duty to monitor and remove imprudent trust investments (Tibble v. Edison Int’l [No. 13-550, 5/18/2015]). In so ruling, the Court found that a lawsuit against plan fiduciaries is filed in timely fashion if the participants’ claim alleging a breach of the continuing duty to monitor occurred within six years. The Court’s ruling may spur lawsuits by participants over plan fees. This Client Action Bulletin provides more perspective.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Supreme Court allows suits challenging fiduciary actions beyond ERISA’s 6-year claim filing period
The U.S. Supreme Court unanimously ruled that 401(k) plan participants may file a suit challenging actions of a retirement plan’s fiduciary that took place before the six-year statute of limitations period allowed by ERISA for filing a claim (Tibble v. Edison Int’l, U.S., No. 13-550, 5/18/15). In so ruling, the Court rejected three appellate courts’ views on the timing for filing lawsuits challenging plan fees.

According to the decision, courts cannot dismiss these types of challenges without considering whether plan fiduciaries have fulfilled their duties to monitor those investments during the relevant six-year window.

To read the court’s opinion paper, click here.

PBGC clarifies requirements of proposed rule on multiemployer plans
The Pension Benefit Guaranty Corporation (PBGC) has received inquiries on whether its proposed rule on mandatory e-filing for certain multiemployer notices would affect notices to participants. The proposed rule only affects notices to PBGC. As stated in the preamble, the proposed rule would require the following notices to be filed electronically with PBGC: notices of termination under part 4041A, notices of insolvency and of insolvency benefit level under parts 4245 and 4281, and applications for financial assistance under part 4281 (see page 18172, middle column). Further, the proposed rule does not involve the Multiemployer Pension Reform Act of 2014 (MPRA). Comments on the proposed rule are due June 2, 2015.

PBGC launches pilot program for smaller asset managers
The PBGC issued a press release announcing a “Smaller Asset Managers Pilot Program” to reduce barriers to competition faced by such firms while maintaining rigorous investment risk and control standards.

To read the entire press release, click here.

Employee benefits on the U.S. Supreme Court’s docket

The U.S. Supreme Court has heard—and will hear—several cases that may be of interest for plan sponsors. On March 4, the Court will hear arguments on whether the federal premium tax credit subsidies available under the Patient Protection and Affordable Care Act (ACA) are available to people in all states or only to those buying coverage in states with a state-run exchange. On February 24, the Court heard arguments on whether 401(k) plan participants may file a suit challenging the retirement plan’s fiduciaries’ actions that took place before the six-year statute of limitations period allowed under ERISA for filing a claim. The Court will also consider the constitutionality of state laws barring same-sex marriages and the recognition of same-sex marriages lawfully performed out of state, though oral arguments have not yet been scheduled.

This Client Action Bulletin summarizes these cases of interest for plan sponsors.

The Supreme Court, Tibble, fees, and the statute of limitations

Smith-SuzanneEarlier this month, the U. S. Supreme Court decided that it will review a case relating to retirement plan fees. Although it is a case about fees, the issue before the Supreme Court is really about ERISA’s six-year statute of limitations.

Background about the case. Plan participant Glenn Tibble brought a lawsuit against his employer, Edison International, and the company’s benefits and investment committees as fiduciaries and administrators of his defined contribution (DC) plan. Tibble claims the plan fiduciaries managed the plan imprudently by selecting retail mutual funds as retirement plan investments when institutional shares were available at a much lower cost to participants.

The lower courts found that the fiduciaries were imprudent in selecting retail-class shares and failing to investigate alternative institutional-class mutual funds.

The problem for Tibble is that some of the retail-class funds were added to the retirement plan more than six years before Tibble filed the lawsuit.

The courts have held that although the fiduciaries were imprudent with the selection of the retail-class shares, Tibble’s claim with respect to funds selected more than six years before the lawsuit is barred by ERISA’s six-year statute of limitations.

Current issue for the Supreme Court review. Now the Supreme Court has agreed to review the statute of limitations issue.

Tibble’s argument, which is supported by the U.S. Department of Labor, is that there is a continuing duty to monitor the plan investments. As a result, Tibble thinks his claim should not be time-barred under the theory that there is a restart of the six-year period with the ongoing failure to monitor the plan’s investments. This is a frightening thought for employers!

Prior court decisions have sided with the fiduciaries and found that the six-year period runs from the initial selection of the investment. While there is a duty to monitor the plan’s investments, the courts have been reluctant to permit a new limitations period for a continuing violation. The Ninth Circuit said it would lead to an “unworkable result” where present fiduciaries could be liable for decisions made by their predecessors decades before.

So what are the takeaways for plan fiduciaries? On the fee issues, if you are selecting retail type mutual funds, you need to consider alternative institutional-class mutual funds and document your decision.

With respect to the statute of limitations, we should have the Supreme Court decision by the end of June 2015. For plan fiduciaries, the decision will be an important ruling on the meaning of ERISA’s six-year statute of limitations and the future liability for plan sponsors.

Rulings from the U.S. Supreme Court: Fiduciaries, ACA, and union fees

The U.S. Supreme Court in late June decided three cases that, while apparently narrow in scope, may be of broad interest to employers. The cases involve: standards for fiduciaries in ERISA-covered retirement plans with employer stock as an investment option; the requirement of the Patient Protection and Affordable Care Act (ACA) that certain preventive healthcare benefits—which include coverage for contraceptives—be provided at no cost to group health plan participants; and the required payment of union fees by certain state workers under a state law.

For Milliman perspective regarding the three rulings, read this Client Action Bulletin.