The issue in the case focused on whether retirement plan participants can challenge investment decisions by plan fiduciaries made more than six years before the suit was filed, if the decisions could have been reconsidered during the six-year window.
The petitioners, former and current participants in an Employee Retirement Income Security Act (ERISA) 401(k) plan sponsored by Edison International, brought suit in 2007 to challenge the prudence of three investment options that had initially been selected in 1999. Both of the lower courts said that such a claim was time-barred by ERISA for being brought more than six years after the fiduciary act occurred.
The petitioners argue that the fiduciaries' decision to not remove the three plans constitutes an on-going breach of duty and is thus not time-barred. This argument undermines the intent of ERISA Section 413(1) and could subject plan fiduciaries to the never-ending threat of litigation.
The NAM, along with other business and trade groups, filed an amicus brief in the case. We argued that the purpose of imposing a time-bar on claims against fiduciaries of ERISA plans was to give them closure and reduce the burden of litigation. ERISA specifically cuts off liability for breaches of fiduciary duty six years after they occur in an effort to cut down on the volume of litigation faced by ERISA plan sponsors. ERISA is designed to encourage employers to offer employee benefit plans by easing their regulatory burden. To accept the petitioner’s argument would mean to transform the statute of repose into a rolling statute of limitations, effectively undermining congressional efforts to lift some of the threat of litigation off of fiduciaries.
On May 18, 2015, the Supreme Court issued a 9-0 opinion in the case. They held that because a fiduciary normally has a continuing duty to monitor investments and remove imprudent ones, a plaintiff may allege that a fiduciary breached a duty of prudence by failing to properly monitor investments and remove imprudent ones. Such a claim is timely as long as it is filed within six years of the alleged breach of continuing duty.