Compliance

Supreme Court Sets Date for Tibble Arguments

The United States Supreme Court will hear arguments in the closely watched 401(k) fee litigation case Tibble v. Edison near the end of February.

By John Manganaro editors@plansponsor.com | January 02, 2015
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An updated docket sheet on the U.S. Supreme Court website showsTibble v. Edison will be argued on February 25, 2015.

The case is considered by industry observers to be the first “excessive fee” litigation to reach the country’s top court. In a 2014 interview with PLANSPONSOR, the plaintiffs’ attorney in the case said Tibble v. Edison is tremendously important for the future of the retirement planning industry.

“The question before the Supreme Court is whether plan sponsors can get permanent immunity on an imprudent investment decision, for all time, based on the limitations period [in ERISA],” says Jerry Schlichter, of the law firm Schlichter Bogard and Denton, who will argue for plaintiffs in the class action. “The lower courts have decided that, even if a plan has been shown to include a fund that is known to be imprudent, as is the case here, it can be protected from liability by the ERISA six-year limitations period. That’s the question the court has to decide whether to overturn—whether it’s appropriate to give sponsors permanent immunity from liability once the investment that is being challenged has been on the plan menu for six years.”

According to the Supreme Court’s website, justices will limit their review of Tibble to the following question: “Whether a claim that ERISA [Employee Retirement Income Security Act] plan fiduciaries breached their duty of prudence by offering higher-cost retail-class mutual funds to plan participants, even though identical lower-cost institution-class mutual funds were available, is barred by 29 U. S. C. §1113(1) when fiduciaries initially chose the higher-cost mutual funds as plan investments more than six years before the claim was filed.”

As part of that question, the Supreme Court must also decide if the so-called “Firestone deference” (as established in the high court's 1989 decision in Firestone Tire & Rubber Co. v. Bruch) applies to fiduciary breach actions under 29 U.S.C. §1132(a)(2), where the fiduciary allegedly violated the terms of the governing plan document in a manner that favors the financial interests of the plan sponsor at the expense of plan participants.

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