PLANADVISER - September/October 2017 - 18

compliance news
Legislative and Judicial Actions
Another Tibble v. Edison
Decision Handed Down
The latest ruling in Tibble v. Edison
comes out of the U.S. District Court
for the Central District of California,
applying the now-famous " distinct
duty to monitor " standard set forth by
the U.S. Supreme Court (SCOTUS) on
an appeal of this very same litigation.
The lawsuit has played out over the
last full decade, filed first in the Central
California District Court and eventually
reaching the Supreme Court after
an appellate ruling.
The Supreme Court's decision was
taken to establish clearly that the
" ongoing duty to monitor " investments
is a fiduciary duty separate and distinct
from the duty to exercise prudence in
the initial choice of an investment.
The big, practical result was that
plan sponsors can no longer rely on
the statute of limitations under the
Employee Retirement Income Security
Act (ERISA) to protect themselves from
accusations of potentially imprudent
investment decisions made in the past
when the investment options in question
remain on the menu. However,
the SCOTUS decision declined to apply
that determination to the facts of the
case at hand, leaving that task to the
lower courts.
Based on the new ruling that has
emerged, it seems the SCOTUS and
appellate court instructions have led
the District Court to side with the plaintiffs,
ruling that defendants breached
their fiduciary obligations of prudence
and monitoring in the selection of all
17 mutual funds at issue. Damages will
be calculated from 2011 to the present,
the decision states, " based not on the
statutory rate, but by the 401(k) plan's
overall returns in this time period. "
The ruling examines in detail the
process surrounding the adoption of
14 mutual funds that the plaintiffs
contend should have been switched by
the defendants from retail to institutional
shares on August 16, 2001, the
start of the statutory period. An additional
three mutual funds in dispute
Plan sponsors
can no longer rely
on the statute of
limitations under
ERISA to protect
themselves from
accusations of
potentially imprudent
investment
decisions.
had their institutional-class shares
become available later, during the
statutory period, and had no statute of
limitations questions.
Second DOL Fiduciary
Rule Delay
The new applicability date for the
Department of Labor (DOL) fiduciary
rule and its accompanying exemptions
is January 1, 2019, according to
an as-yet-unpublished notice that will
soon appear in the Federal Register.
This extension gives the Trump
administration a year-plus to consider
what it will ultimately do with the
signature Obama-era rulemaking.
In particular, this additional year for
transition gives the DOL and the White
House a more reasonable timeframe
in which to consider the vast amount
of industry commentary submitted in
response to President Donald Trump's
request for information (RFI) about the
initial and potential impact of the fiduciary
rulemaking.
American Agrees to Pay
$22 Million
A preliminary settlement agreement
has been submitted for court approval
in a case accusing American Airlines of
including affiliated funds in its retirement
plan investment lineup though
they were more expensive and lowerperforming
than other funds.
The core of the plaintiffs' claims
relate to the use of American Beacon
Funds in the plan. AMR Corp., American
Airlines' parent company, created a line
of mutual funds that was managed by
another subsidiary of AMR Corp. This
fund manager was later-i.e., in 2005-
renamed American Beacon Advisors
Inc. Earlier this year, a federal district
court judge refused to dismiss the case.
The gross settlement amount
agreed on is $22 million, of which
$12 million will be contributed by the
American Airlines defendants or their
agents or insurers, and $10 million
will be contributed by American
Beacon or its agents or insurers.
Closed DB Plan
Nondiscrimination Relief
The Internal Revenue Service (IRS)
has issued Notice 2017-45, which
extends closed defined benefit (DB)
plans' temporary nondiscrimination
relief, as provided in Notice 2014-5 and
extended in Notice 2016-57. The relief
will be available for plan years beginning
before 2019 if the conditions of the
original notice are satisfied.
The IRS and the Treasury Department
expect that the final regulations
regarding closed DB plans will include
some significant changes, in response
to stakeholder comments. However, it
18 | planadviser.com september-october 2017 Art by Tiffany Pai
http://www.planadviser.com
PLANADVISER - September/October 2017

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