"The retail-class shares were identical to the institutional-class shares in every way, save that the retail-class shares charged significantly higher fees, thus reducing the retirement assets of plan participants," the plaintiffs' attorneys, led by noted ERISA lawyer Jerry Schlichter, said in their brief. 

The alleged breaches occurred between 2001 and 2007. When the suit was filed in 2007, the plan still offered retail-class shares in five of the six mutual funds. 

Of the six funds, three were added in 1999 and three in 2002. After a bench trial, the U.S. District Court for the Central District of California found that a fiduciary breach applied to the three funds added in 2002, but not the funds added in 1999. 

The district court ruled the claims against the funds added in 1999 were "untimely" under the six-year statute of limitation provisions of ERISA, which requires claims to be filed within six years of "the date of the last action which constituted a part of the breach or violation." 

The 9^th Circuit Court of Appeals affirmed both of the lower court's rulings. But the plaintiffs are arguing that the appellate court's interpretation of the six-year limitation was "erroneous and should be reversed," according to court documents. 

All of the claims were timely, argue the plaintiffs. Though the funds added in 1999 fall outside the six-year limitation period, Edison's fiduciaries continued to oversee and manage the selection of those funds during the period, they said.

"Petitioners' claims are timely because they derive not from the imprudent addition of the retail-class shares outside the limitations period but from the imprudent management of the plan during the limitations period," the plaintiffs argued. 

ERISA requires fiduciaries to periodically examine the prudence of existing investments, and to remove imprudent investments within a reasonable period of time, according to the plaintiffs. 

"When an ERISA fiduciary fails to fulfill that obligation, it breaches its duty of prudence under the act," their attorneys claimed. 

The Supreme Court agreed to take up the Edison case at the urging of the Obama administration, which told the justices that the lower court ruling "undermines the security and integrity" of billions of dollars in U.S. retirement funds.

Edison called that argument unfounded, saying the case "does not suggest any such threat to the retirement funds of America's workers."

Schlichter and his firm, Schlichter Bogard & Denton, are behind more than a dozen suits over 401(k) plans, including cases against Lockheed, ABB and Caterpillar Inc. The law firm reached a $35 million settlement with Cigna Corp. and a $30 million settlement with International Paper Co.

The justices will hear arguments early next year and rule by the end of their nine-month term in late June.

The case is Tibble v. Edison International, 13-550.

Also read: Beware asset-based fees in small-business 401(k)s