Best Practices in Share Class Conversions
An informal poll of recordkeepers finds differing opinions on how a share class disclosure process should go. The Tibble v. Edison case has put more pressure on plan sponsors to be vigilant.
David Witz1 min read170 wordsWhile historians will likely highlight rulings on same-sex marriage, the Affordable Care Act and redistricting as the most noteworthy rulings of the U.S. Supreme Court’s 2014-15 session, the justices recently made a ruling that seems likely to ultimately put more pressure on plan sponsors and recordkeepers to be vigilant about fulfilling their fiduciary duties.
The Tibble Case
The case in question, Tibble v. Edison International, originated with Glenn Tibble and other employees of Edison International alleging that the company didn’t perform its fiduciary duty because, since 1999, it had offered retail-class mutual funds instead of identical institutional-class funds that charged lower fees.
On May 18, 2015, the U.S. Supreme Court ruled that a fiduciary’s obligations to monitor investment expenses resets the statute at each point in time expenses are evaluated.
Best Practices
- Provide all participants with a 30-day notice when changing funds whose only difference is the share class
- Consider filing a Sarbanes-Oxley mandated notice while also following the same mapping approach
- Allow 45 days for class transfers, including a 30-day window for participant notification
