Penalties in the Tibble Case Keep Piling Up

I wrote last month about the damages assessed against the plan sponsor, Edison International, in the renowned Tibble case. If the $7.5 million awarded to the plan participant plaintiffs wasn’t enough, the district court judge in the case tacked on another $5.6 million in damages.

(This article offers a good summary of the charges and arguments in the Tibble v. Edison case.)

Where did the additional $5.6 million penalty against the plan sponsor come from? I The previous award of $7.5 covered damages from August 2001 (the earliest date according to the ERISA statute of limitations) to January 2011.  it’s based on the plan’s overall losses for using higher-cost retail mutual funds instead of lower-cost institutional funds, which were calculated by both parties to the lawsuit to be in excess of $13.1 million.

The $5.6 million is the difference between the total calculated losses and the previous damage award. The latest damage assessment covers the period from February 2011 to present. Not sure you understand how share classes work? Read here for more information.

Plan fiduciaries are becoming wiser about their duties to abide by a process of prudence when making decisions on behalf of plan participants. The recent flood of participant lawsuits, highlighted by the lengthy arguments made and hefty penalties assessed in the Tibble case, has awakened many plan sponsors and fiduciaries about their responsibilities.

If you haven’t seen our 8 essential elements of a process of prudence, I encourage you to review them. Or even you’ve already done your homework on prudent processes, it’s always useful to review them again as a refresher on your fiduciary duties.

These responsibilities, and the possible repercussions if plan sponsors fail to follow them are too important to ignore or file away once you read them. They need to become a part of the way you manage your retirement plan and commit to fulfilling your fiduciary duties.

Is this the last word on Tibble? Not just yet—the attorneys have yet to file their claim for fees and costs in arguing the case for the last 10 years. Other plan sponsors and fiduciaries should take note—the penalties for failing to follow a process of prudence could become a costly and time-consuming headache.