Monday, June 22, 2015

Supreme Court Ruling Highlights Importance of Fiduciary Responsibility

The recent U.S. Supreme Court ruling in Tibble vs. Edison has been described as “historic,” “ground-breaking,” and even “revolutionary.” The significant attention this case has generated is due in large part to the fact that a case about retirement plans reached the Supreme Court and that the Supreme Court unanimously overturned the lower courts’ decisions.

Yet, the underlying premise behind the decision in this case is not particularly glamorous. It is very familiar to us all: the fiduciary responsibilities of a plan sponsor.


The key points of the case are as follows:
  • Mr. Tibble argued that his employer, Edison International, acted imprudently by including higher-cost retail mutual funds in the retirement plan when lower-cost institutional-class funds were available.
  • Both the District Court and the Ninth Circuit Court ruled that the six-year statute of limitations precluded the claims from being brought.
  • The Supreme Court overturned the lower courts’ rulings and declared that “a fiduciary is required to conduct a regular review of its investment with the nature and timing of the review contingent on the circumstances.” 

In the summary statements, the Supreme Court stated that “the duty of prudence involves a continuing duty to monitor investments and remove imprudent ones under trust law . . . .” In this statement, plan sponsors are reminded that as a fiduciary, they are ultimately responsible for their plan.

A plan fiduciary’s responsibilities include 1) acting solely in the interest of plan participants and beneficiaries, 2) offering a diversified set of investments, 3) abiding by the law and the plan documents, 4) using plan assets exclusively for the plan, and 5) as clearly demonstrated by this case, acting prudently. However, no specific criteria are given for how to perform these duties.

As your Retirement Plan Adviser, HANYS Benefit Services guides you through these steps, creating an environment where you can properly make these decisions in a way that is required by the Employee Retirement Income Security Act (ERISA). We are your prudent experts. We act as a co-fiduciary to your plan, sharing your obligation and responsibilities to make prudent decisions on your retirement plan.

Read Fiduciary Roles And Responsibilities Under ERISA Defined Contribution Retirement Plans to learn more about being a plan fiduciary. If you have questions, please get in touch by calling (800) 388-1963 or email us at hbs@hanys.org.