- The Supreme Court stated that the fiduciary duty under the Employee Retirement Income Security Act of 1974 (“ERISA”) is derived from the common trust law, and its decision affirms the fiduciary duty to provide ongoing monitoring of plan assets.
- The fiduciary duty to prudently select investment options is separate and distinct from the continuing duty to prudently monitor investment options. The duty to investigate as a part of continued monitoring requires a fiduciary to make informed and reasoned decisions regarding investments selected (to include share class) to be in the sole benefit of the plan participants and beneficiaries.
- Until revenue sharing is deemed illegal, controlling plan expenses in the sole interest of participants does not automatically mean the replacement of all funds with higher expense ratios which make revenue share distributions with institutional share class alternatives – selecting the “right” share class is a fiduciary act.
- A fiduciary should consider the investment management fee separately from the expense ratio of a fund since the expense ratio may contain revenue share payments that can be used to offset plan expenses or restore the participant’s account in which the revenue has been derived.
- A part of the ERISA fiduciary responsibility is to administer the plan in accordance with the plan document. If the plan document states that the plan sponsor is fully responsible for all recordkeeping expenses, then plan fiduciaries should not make a deviating decision to use revenue share paying funds to offset such expenses.
Our complete commentary can be downloaded here.