Tibble vs. Edison: Next Steps for Plan Sponsors, Part 2

Over 10 years after the initial filing of the Tibble vs. Edison suit, a new ruling has emerged. In 2015, we wrote a blog post about what the suit could mean for plan sponsors going forward. In 2017, the U.S. District Court for the Central District of California sided with the plaintiffs in the Tibble vs. Edison case, ruling that the plan sponsor breached its fiduciary duty by failing to properly monitor the funds offered in their retirement plan. As news swirls around the Security and Exchange Commission’s (SEC) new fiduciary rule proposal and the Department of Labor’s (DOL) now-defunct effort to enforce a new fiduciary standard, many Plan Sponsors and advisors alike are left wondering if their own prudent process will require changes.

What do we hope Plan Sponsors understandabout this case and the Fiduciary standard?

1. As a Fiduciary to your plan, you have an obligation to prudently select the funds offered by your retirement plan. Furthermore, you must continually monitor those funds. Reviewing the funds annually may not be sufficient. Discuss your process with your investment advisor and decide on a review schedule that works best for you.
2. Document your procedures for monitoring the investments as well as the decisions made regarding the investments.
3. Understand the duty of prudence under ERISA which requires expertise in the area of investments. If you as a plan sponsor are not an expert in investments, hire an investment expert to help you fulfill your fiduciary duty.

With compliance becoming an ever growing concern in qualified retirement plans, Plan Sponsors should also team up with a retirement plan compliance consultant to ensure the proper administration of their plan. Plans ranging in all sizes, from owner only 401(k) plans to large multiple employer plans with thousands of participants, are susceptible to mistakes and losing their qualified status and tax benefits. A compliance consultant will not only take the heavy lifting of administration off your shoulders, they will also review your plan annually to correct any issues and stop future problems before they start!

Fiduciary policy and procedure will be shaped and reshaped over the coming months, but one thing is clear – it’s not going anywhere. As you review your own practices as a fiduciary, communicate with your retirement plan team – which includes your investment advisor, compliance consultant, CPA and any internal staff assisting with the administration of your plan – to ensure you’re on the same page.

Questions about reviewing your plan with your advisor or your TPA? Give us a call! 405-848-401k.