The decision by the US Supreme Court in the Tibble v Edison Case this past spring further highlights the complexity of having to deal with a broad range of fiduciary compliance issues.
In his excellent article posted recently on LinkedIn, tilted: “Tibble v. Edison: Why an Investment Committee May No Longer Suffice”, Jason C. Roberts, Esq., AIFA®, Chief Executive Officer – Pension Resource Institute, talks about the need for Investment Committees to have a broader vision than just investment performance and risk. Here is his article in its entirety:
‘The Supreme Court’s recent decision was limited to a very narrow analysis – were the claims relating to funds added in 1999 time barred based upon a six-year statute of limitations or does the ongoing duty to monitor allow such claims to be filed within six years of the funds remaining in the plan? While the case was ultimately remanded back to the Ninth Circuit to determine, there are some great takeaways from this case overall.
The Edison investment committee did, in fact, demonstrate an awareness of their fiduciary responsibilities as evidenced by the fact that they had such a committee, which met regularly and followed a formal investment policy statement (IPS). At the same time, we too often see that having an “investment committee” can actually be a detriment if the plan fiduciaries focus their time and energy solely on investment-related decisions. Ignoring, for the moment, the fact that one of the primary triggers of this litigation may have been the fact that the fiduciaries failed to follow the terms of the plan document – it originally stated that the company would pay the plan’s administrative expenses entirely from corporate assets and was later amended to provide that it would pay remaining costs after revenue sharing credits – analyzing investments in a vacuum may not be prudent if any of the plan’s administrative expenses (e.g., recordkeeping, administration, advisory/consulting, trust/custody, etc.) are paid from plan assets. Consequently, we encourage our clients to form “retirement plan committees” to evaluate all fiduciary decisions within the appropriate context. (see summary of the case from the SCOTUS Blog here).