Skip to main content

Supreme Court Ruling Highlights Importance of Fiduciary Responsibility

The recent U.S. Supreme Court ruling in Tibble vs. Edison has been described as “historic,” “ground-breaking,” and even “revolutionary.” The significant attention this case has generated is due in large part to the fact that a case about retirement plans reached the Supreme Court and that the Supreme Court unanimously overturned the lower courts’ decisions.



Yet, the underlying premise behind the decision in this case is not particularly glamorous. It is very familiar to us all: the fiduciary responsibilities of a plan sponsor.





The key points of the case are as follows:


  • Mr. Tibble argued that his employer, Edison International, acted imprudently by including higher-cost retail mutual funds in the retirement plan when lower-cost institutional-class funds were available.

  • Both the District Court and the Ninth Circuit Court ruled that the six-year statute of limitations precluded the claims from being brought.

  • The Supreme Court overturned the lower courts’ rulings and declared that “a fiduciary is required to conduct a regular review of its investment with the nature and timing of the review contingent on the circumstances.” 




In the summary statements, the Supreme Court stated that “the duty of prudence involves a continuing duty to monitor investments and remove imprudent ones under trust law . . . .” In this statement, plan sponsors are reminded that as a fiduciary, they are ultimately responsible for their plan.



A plan fiduciary’s responsibilities include 1) acting solely in the interest of plan participants and beneficiaries, 2) offering a diversified set of investments, 3) abiding by the law and the plan documents, 4) using plan assets exclusively for the plan, and 5) as clearly demonstrated by this case, acting prudently. However, no specific criteria are given for how to perform these duties.



As your Retirement Plan Adviser, HANYS Benefit Services guides you through these steps, creating an environment where you can properly make these decisions in a way that is required by the Employee Retirement Income Security Act (ERISA). We are your prudent experts. We act as a co-fiduciary to your plan, sharing your obligation and responsibilities to make prudent decisions on your retirement plan.



Read Fiduciary Roles And Responsibilities Under ERISA Defined Contribution Retirement Plans to learn more about being a plan fiduciary. If you have questions, please get in touch by calling (800) 388-1963 or email us at hbs@hanys.org.

Popular posts from this blog

What are Alternative Investments? 4-Part Introduction

The market has seen a lot of uncertainty in recent years. Because of this, many organizations are looking for new ways to diversify their investment portfolios. Our best-kept “not-so-secret” secret: alternative investments. In this blog, we'll explore alternative investments with a focus on how they can potentially shield your portfolios from downside market volatility. In addition, we'll break down its benefits and risks and whether it could be a good fit for you. Part 1: What are alternative investments? Alternative investments may help diversify your investment portfolios through non-traditional investment strategies. Non-traditional investment options have varying liquidity ranges depending on the strategy and fund structure. Alternative investments are sometimes referred to as alternative assets. According to the Harvard Business School , the seven types of alternative investments are: private equity; private debt; hedge funds; real estate; commodities; collectibles; and s

Section 125 – Cafeteria Plans Overview

A Section 125 plan, or cafeteria plan , allows employees to pay for certain benefits on a pre-tax basis. Employers use these plans to provide their employees with a choice between cash and certain qualified benefits without adverse tax consequences. Paying for benefits on a pre-tax basis reduces the employee’s taxable income and, therefore, reduces both the employee’s and the employer’s tax liability. To receive these tax advantages, a cafeteria plan must comply with the rules of Section 125 of the Internal Revenue Code and related IRS regulations. Under these rules, a Section 125 plan must have a written plan document and can only offer certain qualified benefits on a tax-favored basis. Once an employee makes a Section 125 plan election, they may not change that election until the next plan year, unless the employee experiences a permitted election change event. Also, for highly compensated employees to receive the tax advantages associated with a Section 125 plan, the plan must pass

Employee benefits strategies: 5 budget-friendly ideas

Retirement and employee benefits help create a solid foundation for recruitment and retention. They’re also pivotal in enhancing job satisfaction, boosting productivity, encouraging employee well-being and increasing workplace morale. With the work landscape evolving rapidly, organizations are revisiting their offerings to develop stronger employee benefits strategies.  The first area most small- and mid-size employers investigate is quick, short-term ways to foster company culture. In this blog, we’ll cover budget-friendly ideas to improve your employee benefits initiatives. Think of them as smaller action items that can help you gain a competitive edge. Then, we’ll take a closer look at how customizing your benefits plan can support your new efforts.  1. Promote a healthy work culture  Investing in employee benefit plans is not just about fulfilling a checklist. It's about creating an environment where employees feel supported in both their professional and personal lives. Benefi