Tibble v. Edison Int'l

Background

A group of individual participants in the Edison 401(k) Savings Plan sued the company and other plan managers, claiming they offered higher priced retail mutual funds when lower priced institutional versions were available. The participants said those choices and any failure to switch funds cost plan accounts money. The District Court found that three funds added in 2002 were imprudently selected but held claims about three funds added in 1999 were too old under ERISA’s six-year time limit. The Ninth Circuit agreed in part, and the participants asked the Supreme Court to review the timeliness issue.

Reasoning

The Court examined the ERISA statute’s six-year limit and whether keeping an investment is an “action” or an “omission.” Justice Breyer said the Ninth Circuit erred by focusing only on the original selection date. The opinion explains that trust law imposes a continuing duty to monitor investments and to remove imprudent ones when appropriate. Because that duty is ongoing, a failure to monitor or to remove an imprudent investment can be a breach that occurs within the six-year period. The Court did not decide whether the plan managers actually breached their duty here. Instead, it vacated the Ninth Circuit’s judgment and sent the case back for further consideration consistent with trust-law principles.

Real world impact

The decision affects retirement-plan participants and plan managers by recognizing that failures to monitor investments can restart the six-year clock. It opens the door for more timely suits about ongoing management of 401(k) investments, but the exact scope of monitoring required remains to be decided on remand.