SCOTUS to rule on ERISA fiduciaries duty to monitor investments

The Supreme Court will hear a case questioning the timeline for ERISA cases involving a fiduciary's duty to monitor investments.

SCOTUS, or the Supreme Court of the United States, has agreed to hear a case that questions the extent of an employer's fiduciary duty to monitor the ERISA plans they sponsor. ERISA, or the Employee Retirement Income Security Act, is designed to regulate the funding and administration of employee benefit plans. A key aspect of this law is the protection of employees from wrongdoing by the person or institution managing the plan, also known as the plan fiduciary. A fiduciary is legally required to act exclusively for the benefit of the plan participants. Improper monitoring of plan assets and plan expenses that results in employees incurring excessive fees and charges against their retirement plan assets can be deemed an ERISA violation. Plan participants may be able to bring a case against the fiduciary and could receive an economic award to help mitigate their financial losses.

The case recently accepted for hearing by SCOTUS will seek to clarify the timeline for when a fiduciary may be held accountable for failing to act prudently with respect to retirement plan investments.

More on the case

The case, Tibble v. Edison International, involves a dispute over 401k plan investments. Allegedly "retail-class" investments were purchased when "institutional-class" investments that were markedly similar but charged significantly lower fees were available. The employees argue that a prudent investor would have chosen to purchase the "institutional-class" shares and that the failure to do so led to diminished investment returns.

The primary issue that SCOTUS will decide involves the statute of limitations for ERISA claims. The claim is based on an initial purchase made well over the six-year statute of limitations applicable to ERISA cases. It is argued that although the six-year statute applied to the initial purchase, the account should be continually monitored. As a result, a prudent fiduciary monitoring the account would review the investment on a regular basis (within the six year statute period), would catch the mistake and would have "traded up" for the better shares, mitigating the economic loss suffered by the policy holders.

Impact of the case

Although SCOTUS has yet to rule on the case, arguments are scheduled for February 24, 2015. The case brings attention to the many complexities inherent in ERISA litigation. As a result, those who believe they have an ERISA case are wise to seek the counsel of an experienced ERISA attorney. This legal professional will review your case, guide you through the process and work to better ensure your rights and any potential remedies are protected.

Keywords: employment law