Economic Analysis in Fiduciary Monitoring Disputes Following the Supreme Court's 'Tibble' Ruling

Abstract

Fiduciary monitoring has become a hot topic as a result of the U.S. Supreme Court’s decision in Tibble v. Edison International, according to recent expert insights published by Analysis Group Managing Principal D. Lee Heavner and Fiduciary Leadership LLC Managing Director and Analysis Group affiliate Susan Mangiero. The Tibble ruling, which stated that plan fiduciaries have a responsibility to monitor investments and remove imprudent ones, is important because of the amount of assets in ERISA retirement plans – approximately $7 trillion as of 2012, according to the U.S. Department of Labor. This decision also comes against a backdrop of growing ERISA litigation. In 2014 alone, ERISA litigation settlements exceeded $1.4 billion, according to Benefits Pro, and this amount excludes the substantial legal costs of defending the cases. In the recent article “Economic Analysis in Fiduciary Monitoring Disputes Following the Supreme Court’s ‘Tibble’ Ruling” (Bloomberg BNA’s Pensions & Benefits Daily, June 24, 2015), Dr. Heavner and Dr. Mangiero explain that what constitutes a reasonable monitoring process may be influenced by plan- and investment-specific factors, as well as by the expected benefits and costs of different monitoring activities. “The monitoring of investments is a broad and complex topic. There is no uniform process that is appropriate in every situation. To the contrary, the list of potentially relevant risk factors is long and subject to revision as circumstances change.” The authors also discuss how complexities arise when calculating economic damages due to the wide array of alternative actions and the substantial variation in timing that may be consistent with a prudent monitoring process.“These are important issues that plan sponsors, fiduciaries, and ERISA lawyers and experts will have to address if, as expected, further challenges to fiduciary monitoring of investments emerge post-Tibble,” said Dr. Heavner.