401(k) plans must monitor investments, Supreme Court rules

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(Bloomberg) -- The U.S. Supreme Court said 401(k) plans have a duty to monitor the investment options they offer, in a ruling that may help investors press lawsuits over underperforming funds and excessive fees.

The justices unanimously revived claims that Edison International’s 401(k) plan should have shifted investors from the retail class shares of three funds into identical institutional class shares that carried lower fees.

The ruling was a limited one. The court didn’t decide whether Edison should have jettisoned the retail class funds or the extent to which it needed to review those investments. The justices sent the case back to a lower court to consider those questions.

Also see: DOL primed to expand 401(k) oversight through Tibble v. Edison

The case reached the Supreme Court amid intensified scrutiny of fees in retirement accounts, now the primary savings vehicle for old age. Americans held $6.8 trillion in 401(k)-type plans as of Dec. 31, according to the Investment Company Institute.

The investor suit against Edison is one of more than a dozen that have been filed against companies since 2006. In February, Lockheed Martin Corp. settled for $62 million a case that it faced.


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