To avoid breach of fiduciary duty claims in the future, retirement plan sponsors need to reexamine the investment policy statement for their 401(k) plans to make sure they are doing enough to make sure workers’ retirement funds are invested in the lowest fee and best investments possible.

The Supreme Court’s decision this week in Tibble v. Edison International left it up to the lower courts to decide what constitutes a “duty to monitor” investments in an employer-sponsored defined contribution plan.

The case initially was filed in 2007 by Glenn Tibble and other petitioners who claimed that their employer, Edison International, offered them higher cost retail-class shares of six mutual funds when identical, lower-cost institutional shares were available. At issue before the Supreme Court was whether Tibble and the others could sue for investments that were made more than six years before the lawsuit was filed.

See also: SCOTUS decision opens door to more 401(k) lawsuits

The lower courts ruled that the petitioners could only sue over three of the investment funds because they fit within the Employee Retirement Income Security Act’s six-year statute of limitations to file a claim.

The Supreme Court on Monday found that the Ninth Circuit Court of Appeals erred when it wouldn’t allow retirement plan participants to sue for a fiduciary breach on three of the six investments in the plan because a “fiduciary must discharge his responsibilities with the care, skill, prudence, and diligence that a prudent person acting in a like capacity and familiar with such matters would use.”

“The Supreme Court in Tibble held that there is an ongoing fiduciary duty to monitor investments in a 401(k) plan to ensure that the investments remain prudent, which applies even if there is no intervening change in circumstances,” said Jesse Gelsomini, a partner with Haynes and Boone in Houston. “This duty is distinct from the duty to prudently select investment alternatives.”

So what does that mean for employers?

It means that “an employer or other responsible fiduciary will not avoid potential liability if it selects an imprudent investment alternative for the 401(k) plan, but then successfully waits out the six-year ERISA limitations period,” Gelsomini said. “Generally, 401(k) plan investment fiduciaries carefully examine a potential investment when first deciding whether to offer it as an alternative under the 401(k) plan.  If the investment is deemed to be prudent and is selected as an alternative, the fiduciary generally will continue to offer the investment as an alternative unless a change in circumstances renders it imprudent.”

A change in circumstances could include an impermissible change in investment style, underperformance over a series of quarters or an excessive increase in fees.

See also: SCOTUS stating the obvious in Tibble ruling

“Following the Supreme Court’s decision in Tibble, an investment alternative must continue to be monitored for prudence under ERISA on an ongoing basis even if there is no material change in circumstances,” he said.

That means it is up to the plan fiduciaries to keep abreast of the various investments in their retirement plan.

The Supreme Court did not specify how often a plan fiduciary must monitor those investments, however, but instead remanded the case back to the lower courts to figure out.

“The Supreme Court’s failure to articulate any standards for the lower courts to use in evaluating ‘failure to monitor’ claims means we will likely see conflicting rulings by lower courts regarding the factors that would trigger a duty to review investments, how frequently investments must be reviewed in the absence of specific triggering events and how thorough the review must be,” said David Olstein, executive compensation and benefits counsel at Skadden, Arps, Slate, Meagher & Flom LLP in New York.

He added that although the ruling is likely to result in additional lawsuits, the court’s decision can be seen as pro-defendant.

See also: 401(k) suits draw employee attention to fees, fiduciary duty

“By recognizing that a fiduciary’s duty to monitor investments and remove imprudent investments is separate and apart from the duty to exercise prudence in selecting investments, the Supreme Court implicitly rejected ‘continuing breach’ theories of recovery that would allow a plaintiff to recover investment losses incurred more than six years prior to the filing of a fiduciary breach claim,” Olstein said.

To protect themselves against such claims, employers should review their 401(k) plans investment policy statement to make sure there are clear guidelines specifying how often plan fiduciaries must perform a comprehensive review of investment alternatives “even absent an intervening change in circumstances” and must specify how it will go about removing the investments if they are deemed imprudent, Gelsomini said.

If the plan doesn’t have clear guidelines or if the guidelines don’t include frequent reviews of these investments, “the employer should amend the investment policy statement to provide for a comprehensive review of each investment alternative at least annually, and more frequently if the responsible plan fiduciary determines that doing so would be prudent under ERISA’s fiduciary standards,” he added.

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