401(k) Fees Decision Issued by Ninth Circuit in Tibble v. Edison: On March 21, 2013, the Ninth Circuit Court of Appeal issued an opinion in Tibble v. Edison International, a 401(k)fee case of interest to participants, plan fiduciaries and service providers alike. Here are some of the highlights of the 50-page decision:
1. STATUTE OF LIMITATIONS: The Court rejected a “continuing violation theory”, holding that a six-year statute of limitations begins to run when plan fiduciaries made the initial decision to include a challenged investment in the Plan. 2. SAFE HARBOUR Section 404 (c): The Court held that ERISA Section404 (c) does not relieve a plan fiduciary from liability arising from the decision to offer certain investment choices to participants. The Court held that a fiduciary is in a better position than a participant to prevent losses that arise from the inclusion of unsound investment options.
3. RETAIL VERSUS INSTITUTIONAL INVESTMENT OPTIONS: The Court affirmed the District Court’s ruling that the plan fiduciaries had breached their fiduciary duty of prudence under the particular circumstances presented in the case by not offering an “institutional” share class rather than the “retail class”of mutual funds that it offered. -The Court specifically refused to rule categorically, however, that plan fiduciaries should only offer such institutional shares. -The Court emphasized that the fact that Edison had used an investment consultant in selecting the retail class did not matter because the consultant was a “consultant, not the fiduciary” and thus,Edison was not reasonable in relying on the consultant’s conclusions because in the facts before the court, Edison didn’t show that either it or its consultant considered different share classes.
4. REVENUE SHARING: The Court, in affirming the district’s court’s grant of summary judgment on the issues, ruled that revenue sharing between mutual funds and an administrative service provider did not automatically violate ERISA.
5. JUDICIAL STANDARD OF REVIEW FOR BREACH OF FIDUCIARY DUTY CLAIMS: The Court ruled that the “usual” abuse of discretion standard of review that applies in benefit claim cases also applies in judicial review of a plan administrators’ actions,including Plan interpretation in cases involving breaches of fiduciary duty, where the plan grants such discretion to the administrator. The full decision can be found at:http://cdn.ca9.uscourts.gov/datastore/opinions/2013/03/21/10-56406.pdf
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