Last year, the United States Supreme Court provided a clear reminder of the continuing nature of fiduciary responsibilities in its Tibble v. Edison International opinion. It emphasized that fiduciaries indeed must perform a regular review of a plan’s investments, and it rejected the idea that a fiduciary could breach its ongoing responsibilities only if there were a “significant change in circumstances”.
The 9th Circuit Court of Appeals, on remand, has considered the plaintiffs’ arguments. It determined that they indeed are entitled to an additional opportunity to argue the various breach of fiduciary responsibility claims. What does this mean? It means that the plan sponsor and other fiduciaries will be forced to defend their inaction – to defend the lack of awareness, care, or prudence that resulted in a mega plan continuing to use more expensive share classes than what was available.
We expect this will raise additional awareness of the risks associated with using retail share class funds and relying on revenue sharing, as well as the few good explanations or such an approach. The 9th Circuit Court of Appeals opinion is available here.
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