Last week, the Supreme Court’s decision in Tibble v. Edison International confirmed the ongoing duty of retirement plan sponsors to actively review plan investments.

The unanimous opinion stated that plan administrators (the employer and the plan’s trustees) must continue to “monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the trustee’s duty to exercise prudence in selecting investments at the outset.”

According to attorney Greg Ash of law firm Spencer Fane Britt & Browne LLP, the Court held that ERISA fiduciaries have a “continuing duty” to monitor investment options, and that plan participants have six years from the date of an alleged violation of that duty to file a lawsuit against the plan’s fiduciaries. Ash states in a recent article, “This ruling significantly undercuts the utility of a statute of limitations defense that had been successfully deployed by plan fiduciaries in previous cases, and creates fertile ground for more litigation.”

In another article, attorneys Preston Burch and Timothy Verrall of law firm Ogletree Deakins stated: “In effect, the Court adopted a ‘continuing violation’ approach to ERISA’s statute of limitations, meaning that a participant will be able to pursue claims against a plan fiduciary for failing to properly monitor investments and remove imprudent ones if the failure to monitor and/or remove occurs within six years of the suit. The Court identified other key issues associated with the selection and retention of investment options for retirement plans but opted to leave exploration of those issues to the Ninth Circuit. The Court did note that fiduciaries have a duty ‘of some kind’ to periodically monitor a plan’s investment options and, if appropriate, to replace underperforming options. However, the Court did not specify the substance or timing for these periodical assessments. It is also important to note, as the Court did, that the decision to select a particular fund is distinct from the decision to retain that fund. Obviously, what was a good investment in year 1 may not be an appropriate investment in year 10.”

Imagine being an independent insurance agency owner who sold your agency years earlier only to end up facing an ERISA lawsuit for breach of fiduciary duty. Aside from their own 401(k) plans, agents providing D&O coverage should be sure to discuss the impact of this decision for their clients. It is clear that plan sponsors and their fiduciaries must implement a systematic process for ongoing review the investment options, including not only the returns and composition of funds, but also the expense ratio (cost) of the fund and other plan expenses to determine whether there are more appropriate options.

The Big “I” recently went through this process when it established the new Multiple Employer Plan (MEP), which has an outside ERISA 3 (38) Advisor that monitors investment options and furnishes reports to the MEP Investment Committee on behalf of Big “I” Retirement Services, LLC. Aggregating the 75 member plans and more than $70 million in the MEP enables institutionally priced investment options and other resources for plan sponsors and plan participants. For more information, please contact Christine Muñoz, Big “I” director of retirement services, at 800-221-7917, ext. 5466.

Remember also that this year, the Department of Labor (DOL) issued proposed regulations designed to define the status of advisors and agents who provide advice or other services to current or former plan participants who roll their 401(k) balances to an IRA. Last week, the DOL extended its comment period by 15 days, but will likely issue final regulations by the end of the summer—which will greatly impact registered reps, their broker/dealers and other retirement plan service providers.

Don’t be surprised to see more plaintiff cases against plan sponsors. The regulatory environment will continue to evolve, making it critical that plan sponsors have the appropriate processes and professional guidance in place to avoid looking over their shoulder for years to come.

Dave Evans is a certified financial planner and an IA contributor.