Under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), fiduciaries of ERISA plans have a duty to exercise reasonable prudence with respect to investments offered under their plans. ERISA provides a six-year statute of limitations for claims for breach of fiduciary duty, requiring that any claim be filed not more than six years after “the date of the last action which constitutes a part of the breach or violation,” or, in the case of a breach by omission, “the latest date on which the fiduciary could have cured the breach or violation.” 29 U.S.C. § 1113. Any claims filed outside the limitations period cannot be the basis of a court action.
In Tibble v. Edison International, No. 13-550 (May 18, 2015), beneficiaries of an ERISA plan sued the plan for breach of fiduciary duty regarding certain mutual funds that had been offered as plan investments beginning in 1999. The plan fiduciaries argued that the case was barred by the six-year statute of limitations, and both the district and circuit courts agreed.
The United States Supreme Court reversed, holding that the statute of limitations had not run. Although the funds were first offered in 1999, which was outside the limitations period, the Court noted that fiduciaries have a continuing duty to monitor and remove imprudent investments. This duty is separate and apart from the fiduciaries’ duty to exercise reasonable prudence in making initial selections of investments. Since the complaint in this matter alleged a breach of the fiduciaries’ ongoing monitoring duty, the Court held that the complaint was timely, and the case was remanded for further proceedings.
What Does This Mean For You? If you have a company-sponsored ERISA plan, such as a 401(k) option for employees, you should ensure that the fiduciaries of the plan not only use prudence in selecting investment offerings, but also monitor the investments offered, and take timely action to remove imprudent investments.
If you have any questions about this or any other employment or labor law issue, please contact Whitney Rahman at (717) 509-7237 or firstname.lastname@example.org.
**This update is provided for informational purposes only and should not be construed as legal advice or as creating an attorney-client relationship where one does not already exist**