Confero Summer 2013: Issue 3 | Page 16

“… 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