Appeals court sends 401(k) fee case Tibble vs. Edison back to District Court to be reheard

The 9th U.S. Circuit Court of Appeals in San Francisco on Friday ordered a U.S. District Court to rehear the Tibble vs. Edison International excessive 401(k) fee case, which centered on the choice of retail vs. institutional investment products.

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The opinion written by Judge Milan D. Smith Jr. vacated the Los Angeles District Court’s ruling that the case could not proceed because of a statute of limitations on three of six funds in question. “Regardless of whether there was a significant change in circumstances, Edison should have switched from retail-class fund shares to institutional-class fund shares to fulfill its continuing duty to monitor the appropriateness of the trust investments … a trustee cannot ignore the power the trust wields to obtain favorable investment products, particularly when those products are substantially identical — other than their lower cost — to products the trustee has already selected.”

“We also encourage the District Court to re-evaluate its fee determination in light of the Supreme Court’s decision and this court’s en banc decision,” Mr. Smith wrote.

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The 9th Circuit had previously affirmed the District Court’s ruling for Edison, which led to the 2015 U.S. Supreme Court ruling in its first 401(k) case alleging excessive fees that trustees have an ongoing duty to monitor plan investments. In April, a three-judge panel for the 9th Circuit ruled in favor of Edison International, but on Aug. 5, the appeals court agreed to the en banc rehearing resulting in the latest order.

Hazel Bradford is a reporter with InvestmentNews’ sister publication, Pensions & Investments.