On October 2nd the Supreme Court of the United States agreed to consider the statute of limitations issue from the Ninth Circuit case of Tibble v. Edison International. In reviewing this specific issue, the Court may decide whether ERISA allows plan participants to challenge decisions initially made more than six years ago, if those decisions could have been reconsidered during the six-year window.
The plaintiffs in Tibble are participants in the Edison 401(k) Savings Plan. Like most 401(k) plans, they are permitted the ability to select among investments from a menu designed by the Investment Committee of the employer. These plaintiffs allege that the sponsors breached their fiduciary duty by making available to participants higher-cost retail investment options when less-expensive institutional investments were available.
The plaintiffs argue that the employer chose more expensive investment options rather than directly allocating plan costs to participants, which would have been within the sponsor’s purview. Plan sponsors have a high degree of latitude in electing what expenses should be paid by the plan (participants in a defined contribution plan) or the plan sponsor. However, an increasing number of fiduciaries are ending up in courtrooms about their failure to articulate and document the decisions they’ve made about fee payment, further highlighting the benefits of a Fee Policy Statement where such decisions can be memorialized.
In a recent paper, summarizing our analysis of provider fees in 2014, we conclude that fee compression has been slowing. However, we also state that fee disclosure and cases like Tibble are making fee fairness the next wave of client attention. To read our 2014 Fee Benchmarking Study Results, click the button below.
