For Immediate Release
Washington, DC – The ERISA Industry Committee (ERIC), the leading trade association dedicated exclusively to the employee benefit and compensation interests of America’s largest companies, today filed with the U.S. Supreme Court an amicus brief in the Tibble v. Edison International case.
The brief was prepared by Gibson, Dunn & Crutcher LLP. Along with ERIC, the National Association of Manufacturers, the U.S. Chamber of Commerce, the American Benefits Council, and the Business Roundtable participated on the brief.
The brief urges the Court to uphold earlier court rulings concerning the Employee Retirement Income Security Act’s (ERISA) six-year statute of limitations provision, and reject a challenge concerning the prudence of three investment options that were selected for inclusion in a plan sponsor’s 401(k) plan more than six years prior to the alleged fiduciary breach claims.
In the Tibble case, current and former participants in an ERISA-covered 401(k) plan sponsored by Edison International, brought suit in 2007 to challenge the prudence of three investment options that had been selected for inclusion in the plan in 1999. These investment options were retail-class shares of mutual funds, and the petitioners’ claim of imprudence is based on the availability of institutional-class shares in the same funds that offered lower fees.
Both lower court rulings concluded that the petitioners’ challenge to the three investment options was barred by ERISA’s timely filing provision. The petitioners argue that, even in the absence of any material change in circumstances, the plan fiduciaries’ failure to remove the three retail-class options from the plan and replace them with institutional-class shares in the same mutual funds was a breach of fiduciary duty that is not time-barred because it occurred continuously during the six years prior to the filing of the complaint.
ERIC’s amicus brief to the Supreme Court argues that this type of “continuing violation” theory would subject fiduciaries to perpetual exposure to litigation and potential liability for investment selection and other acts completed long before suit was actually filed.
In a separate statement, ERIC President and CEO Annette Guarisco Fildes said that, “Adoption of the theory urged by the plaintiffs and the DOL would be disruptive to plan operations and participant interests by potentially requiring constant re-evaluations and changes to investment choices selected and relied upon by participants.”
The brief explains that one of ERISA’s primary goals is to reduce the regulatory burden and the volume of potential litigation faced by ERISA plan sponsors and fiduciaries in order to encourage employers to offer employee benefit plans. “ERISA furthers that goal by cutting off liability for breaches of fiduciary duties six years after they occur, thereby providing plan fiduciaries the repose and finality they require to effectively administer employee benefit plans,” the brief emphasizes.
“This Court should reject this effort to rewrite [ERISA] Section 413(1), which would effectively transform Section 413(1) from a statute of repose into a rolling limitation on damages, and instead preserve the careful balance struck by Congress when it crafted ERISA,” the group argued.
The brief further contends that the petitioners, along with the Department of Labor (DOL) in its brief, conflate two different aspects of fiduciary decision-making — the initial selection of investment options and the ongoing monitoring of investment performance — in an effort to endow plan fiduciaries with a constant duty to reevaluate the entirety of a portfolio on some unstated periodic basis. “While both the selection duty and the monitoring duty are well-established and rigorous, they are not the same and it is both facile and erroneous to suggest otherwise,” according to the brief.
Finally, the brief suggests that the DOL, in its support of the petitioners’ position, is attempting to engage in regulation via amicus brief. “By joining in petitioners’ broadside attack on retail-class mutual fund shares, the DOL is effectively saying that these are imprudent options for 401(k) plans, without having made any regulatory pronouncement to that effect,” the brief stated.
The brief can be accessed by clicking on the link below.