Like other industry practitioners closely involved in Employee Retirement Income Security Act (ERISA) compliance, Russell Hirschhorn has spent much of the last week discussing implications of the U.S. Supreme Court’s decision in the long-running Tibble vs. Edison fee case.
Hirschhorn is a senior counsel in the ERISA Practice Center and the Labor & Employment Law Department of Proskauer, where he focuses on complex ERISA litigation and advises and represents employers, fiduciaries, trustees and plan service providers on benefit and fiduciary issues. Explaining the background of the case, he says the question before the Supreme Court involved the timeliness of claims challenging a fiduciary’s continued offering of an investment fund initially selected outside ERISA’s six-year period of repose.
In short, the Supreme Court determined such claims should not generally be time barred, because ERISA fiduciaries also have a distinct “duty to monitor” the ongoing prudence of investments offered on a defined contribution plan investment menu. This doesn’t necessarily amount to a victory for the plaintiffs and their claims that Edison International failed in its duty of prudence, Hirschhorn says, because the SCOTUS ruling very purposefully declined to define the real shape and limits of the duty to monitor.
The Court instead remanded those challenging factual determinations to the appellate court for additional consideration, Hirschhorn notes. His opinion on the Tibble decision’s implications seems to match the wider industry consensus that the top federal court took only a modest step to ensure the fiduciary “duty to monitor” retirement plan investments is defined as a distinct duty from the initial requirement to prudently select investments under ERISA. He feels it’s too soon to say exactly how the duty to monitor will be treated in future litigation, but he says a few things are already clear about the limits of such challenges.
“The U.S. Supreme Court ruled that an ERISA plan participant may allege that a plan fiduciary breached the duty of prudence by not properly monitoring the plan’s investment options as long as the alleged breach of the continuing duty occurred within six years of the suit,” he explains.
In so ruling, Hirschhorn says the Supreme Court vacated an earlier decision from the 9th U.S. Circuit Court of Appeals, which held that, absent a “significant change of in circumstances,” a participant could not pursue such a claim based on the selection of an investment option more than six years prior to the suit.
The Court reasoned that trust law requires a fiduciary to conduct “a regular review of its investments with the nature and timing of the review contingent on the circumstances,” Hirschhorn continues. This means it “will not be enough to simply plead that defendants failed, within six years of filing suit, to prudently monitor an investment option,” Hirschhorn notes. Rather, as the Supreme Court has articulated in a variety of earlier cases, a plaintiff must be able to plead a plausible claim.
“That is, plaintiffs will have to plead enough factual matter to nudge their claims across the line from conceivable to plausible,” Hirschhorn says. To that end, the Supreme Court remanded the Tibble case to the 9th Circuit to determine for an evaluation of the “contours of the alleged breach of fiduciary duty” and whether the fiduciaries satisfied their continuing obligation to monitor the investment options during the six years prior to the filing of the lawsuit.”