“… The Tibble appellate decision contains an abundance of points
for ERISA plan fiduciaries to consider.”
first investigating the possibility of similar, institutionalclass alternatives. It rejected the defendants’ argument that
they had reasonably relied on Hewitt Financial Services
for advice because “independent expert advice is not a
whitewash.” Moreover, it found that institutional-class
shares for the three mutual funds at issue would have been
more appropriate for the following reasons. First, all three
mutual funds offered institutional shares that were 24 to
40 basis points cheaper. Second, there were no major
differences in the investment quality or management for
these two classes of funds. Third, even if the Plan could
not meet these three funds’ investment minimum, it could
have obtained a waiver because funds regularly waive such
requirements for 401(k) plans with assets over a billion
dollars, such as the Plan.
The Ninth Circuit, in joining the Third and Sixth Circuits,
refused to limit the application of a deferential standard of
review to only benefit claims. It held that the framework
for reviewing disputes over plan terms — as set forth in
key Supreme Court cases, Firestone Tire & Rubber Co.
v. Bruch, Metropolitan Life Insurance Co. v. Glenn, and
Conkright v. Frommert — also applies to all ERISA claims,
including cases implicating fiduciary duties.
Statute of Limitations
Revenue Sharing
The Ninth Circuit agreed with the district court that the
six-year prong of the ERISA statute of limitations for the
breach of fiduciary duty applied to the plaintiffs’ claims
and started to run from when the initial decision was made
to include the challenged investments as Plan options
absent changes in conditions that prompted “a full due
diligence review of the funds, equivalent to the diligence
review Defendants conduct when adding new funds to the
Plan.” With this decision, the court rejected the plaintiffs’
argument that their claims were timely so long as the
challenged investments were in the Plan because there was
a “continuing violation.” It also rejected the defendants’
argument that a three-year statute of limitations applied
because the plaintiffs knew about the retail-class mutual
funds through the Plan’s SPD and mutual fund prospectuses.
The Ninth Circuit held that the defendants did not violate
the Plan document or ERISA section 406(b)(3) by using
funds from revenue sharing to pay for some of the Plan’s
administrative costs.
Safe Harbor Section 404(c)
In agreeing with the Department of Labor (“DOL”), the
Ninth Circuit held that ERISA section 404(c) does not
apply to a fiduciary’s selection of investments funds as part
of an investment menu. According to the DOL, ERISA
section 404(c) could not protect the defendants from losses
that resulted from their decision to include the challenged
funds because “the selection of particular funds to include
and retain as investment options in a retirement plan is the
responsibility of the plan’s fiduciary, and logically precedes
(and thus cannot result from) a participant’s decision
to invest in any particular option.” The court found the
DOL’s interpretation reasonable because the fiduciary is in
14 | SUMMER 2013
a better situation than the participant to prevent the losses
that could arise from the inclusion of unsound investment
options.
Standard of Review for
Fiduciary Breach Claims
In applying the deferential standard of review because t