On May 18, 2015, a unanimous Supreme Court of the United States held that there is a continuing duty of prudence with respect to investment options made available under a 401(k) plan and that claims of a breach of such fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA) are timely as long as the alleged breach occurred within six years of filing suit.

Tibble et al. v. Edison International et al. involves several individual beneficiaries of the Edison 401(k) Savings Plan who filed a lawsuit against Edison International in 2007 seeking to recover damages for alleged losses suffered by the plan. Specifically, the individual beneficiaries contended that Edison International violated its fiduciary duties with respect to three mutual funds added to the plan in 1999 and three mutual funds added to the plan in 2002. The individual beneficiaries maintained that Edison International acted imprudently by offering six higher-priced retail-class mutual funds as plan investments when materially identical lower-priced institutional-class mutual funds were available.

The District Court agreed with respect to the funds added to the plan in 2002—finding that there was no credible explanation for offering retail-class (i.e., higher-priced mutual funds) and that Edison International did not exercise "the care, skill, prudence and diligence under the circumstances" that ERISA demands of fiduciaries.

However, as to the three funds added to the plan in 1999, the District Court held that the claims were untimely because these mutual funds were included in the plan more than six years before the complaint was filed in 2007.

Section 413 of ERISA provides that no action may be commenced with respect to a fiduciary's breach of any responsibility, duty or obligation after the earlier of six years after: (1) the date of the last action which constituted a part of the breach or violation; or (2) in the case of an omission, the last date on which the fiduciary could have cured the breach or violation. The District Court, as well as the Ninth Circuit Court of Appeals, found that the claims of the individual beneficiaries related to the 1999 mutual fund additions were untimely on the basis that Edison International had selected the funds more than six years before the individuals brought the action.

The Supreme Court found error with this ruling, noting that the lower courts did not recognize that under trust law a fiduciary is required to conduct a regular review of its investment with the nature and timing of the review contingent on the circumstances. Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones. This continuing duty exists separate and apart from the trustee's duty to exercise prudence in selecting investments at the outset.

In addition, the Supreme Court concluded that a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones. A plaintiff may allege that a fiduciary breached its duty of prudence by not properly monitoring investments and removing imprudent ones. In such a case, as long as the alleged breach of the continuing duty occurred within six years of suit, the claim is timely.

The Supreme Court offered no view as to the scope of Edison International's fiduciary duty in this case and remanded for the Ninth Circuit to consider the claims of the individual beneficiaries that Edison International breached its duties within the relevant six-year period.

Tibble provides another reminder to employers sponsoring 401(k) plans for the benefit of their employees that the duty of prudence with respect to investment options does not go away following the initial selection of prudent investment options. Plan fiduciaries have a continuing obligation to monitor the investments and remove those that are deemed to be imprudent. Claims for violations of ERISA's fiduciary duties will not be barred by ERISA's six-year statute of limitations with respect to investment decisions that were initially made more than six years prior to suit due to this continuing duty of prudence.