The Supreme Court recently held in Hughes v. Northwestern University that an ERISA fiduciary has a duty to monitor each plan investment option. The court found that a plan fiduciary can be held liable for failure to monitor even if some plan investment options are adequate. The court issued a unanimous opinion holding that ERISA fiduciaries have an ongoing duty to monitor investments and improve imprudent investments regardless of the number of plan investments available.
The opinion reversed the 7th Circuit’s holding that this responsibility was satisfied if the plan offered an adequate array of investment choices. Instead, fiduciaries can be held liable if they fail to monitor all investments and remove any imprudent investments from the plan’s menu of investment choices. In other words, identifying well-designed options doesn’t relieve the plan sponsor of liability with respect to poor options and the ERISA fiduciary has a duty to protect participant-employees from making poor investment choices.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the Supreme Court’s decision in Hughes v. Northwestern University.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
Byrnes
Their Reasons:
Bloink: The Supreme Court absolutely got it right when they confirmed that fiduciaries have an ongoing duty to monitor all investment options to ensure they remain prudent over time, regardless of the number of plan investments available. That duty should extend to each and every investment choice that the fiduciary makes available to plan participants.