Supreme Court Confirms that Plan Fiduciaries have a “Continuing Duty of Some Kind” to Monitor Investments

Tom Hoecker • May 19, 2015

In Tibble v. Edison International , Justice Breyer held, for a unanimous Supreme Court, that “a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones.” In so ruling, the Court reversed a decision from the Ninth Circuit, which held, in essence, that plan fiduciaries could not be held responsible for imprudent investment decisions made more than six years prior to the filing of the complaint.

In Tibble , the fiduciaries of the Edison 401(k) Savings Plan added three mutual funds to the plan’s investment lineup in 1999. The fiduciaries added an additional three investment funds to the fund lineup in 2002. In 2007, the plaintiffs filed a complaint, alleging that the fiduciaries acted imprudently in selecting these six higher priced retail-class mutual funds over less expensive institutional-class funds.

The District Court and the Ninth Circuit concluded that the plan fiduciaries’ decision to add the three funds in 1999 could not be challenged, since it was outside the six-year statute of limitations. In reaching this conclusion, the District Court and the Ninth Circuit found that the last act or omission involved in the fiduciary breach was the selection of the funds in 1999. Both the District Court and the Ninth Circuit did ask whether the circumstances had changed enough in the intervening years to require the fiduciaries to review the funds added in 1999, but they apparently concluded that circumstances had not changed sufficiently to require such a review.

The Supreme Court followed a different approach. Relying on common law trust principles, the Supreme Court disagreed that “ only ” a significant change in circumstances could give rise to a new breach of fiduciary duty. Rather, the Supreme Court found that under trust law a fiduciary has an obligation to regularly review its investments, noting that “the nature and timing of the review [is] contingent on the circumstances.” The Supreme Court also held that this duty exists separate and apart from the trustee’s duty to exercise prudence in selecting investments at the outset . . . . the trustee must ‘systematic [ally] conside[r] all the investments of the trust at regular intervals’ to assure that they are appropriate.”

The Tibble Court declined to comment on the scope of the duty to monitor, simply noting that “a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones.” Unless and until the Ninth Circuit, another Circuit or the DOL provides additional guidance, plan fiduciaries are left with the general guidance of ERISA’s Prudent Person Rule. In other words, in monitoring plan investments, plan fiduciaries should act “with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims; . . . .”

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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