When does the six year limitation period begin? Every day? ERISA fiduciaries just got a wake-up call in Tibble v. Edison International (US Supreme Court 05/18/2015).
Beneficiaries of a 401(k) plan sued the plan fiduciaries claiming breach of fiduciary duties. The claim was that the fiduciaries offered higher priced mutual funds when cheaper funds were available. Those funds were added to the plan in 1999 and 2002. ERISA has a six year statute of limitations, and the beneficiaries filed suit more than six years after these mutual funds were included in the plan.
Lower courts held that the beneficiaries' claims were time-barred. Their theory had its focus on the initial selection of the investments.
The US Supreme Court reversed unanimously.
- "Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the trustee’s duty to exercise prudence in selecting investments at the outset."
- "In short, under trust law, a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones. A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones. In such a case, so long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely. The Ninth Circuit erred by applying a 6- year statutory bar based solely on the initial selection of the three funds without considering the contours of the alleged breach of fiduciary duty."