The recent Supreme Court decision on Intel Corp. giving defined contribution plan participants more time to file ERISA claims unless they have "actual knowledge" of the plan sponsor's investment decisions and actions is prompting questions about litigation risk, options for sponsors to protect against it, and even whether alternative investments should be an option.
"Plan sponsors are frustrated and concerned about where they are supposed to go next in terms of providing information to participants," said Aliya Robinson, senior vice president of retirement and compensation policy at the ERISA Industry Committee in Washington, one of several employer groups that backed Intel Corp. at the Supreme Court.
On Feb. 26, the Supreme Court said in a unanimous decision that Intel's investment policy committee could not enforce a three-year deadline for filing ERISA claims because receiving plan disclosures about investment lineups and changes and having actual knowledge of them were not the same thing. Current law established a six-year statute of limitations if the plaintiff does not have actual knowledge, but a three-year limit for those who do.
"The plaintiff must in fact have become aware of that information," said the opinion delivered by Justice Samuel Alito. (Several justices acknowledged during arguments that even they don't always thoroughly read disclosures.) The opinion recognized Intel's argument that the inter- pretation "substantially diminishes" protection for ERISA fiduciaries, but said that any changes would have to come from Congress.
With the timing question now answered by the highest court, the case, Sulyma vs. Intel Corp. Investment Committee et al., goes back to U.S. District Court in San Jose, Calif., to decide the merits of several claims raised on behalf of a potential class by Christopher Sulyma, a participant in two Intel defined contribution plans. The 2015 lawsuit alleged that plan managers violated their ERISA fiduciary obligations by offering too many alternative investments and inadequate disclosures of investments.
When they increased both plans' allocation to hedge funds and private equity after the 2008 financial crisis, Mr. Sulyma alleged, the decision violated ERISA's duty of prudence and caused losses from higher fees and lower investment returns relative to other funds. Intel, which said in its petition for Supreme Court review that it repeatedly disclosed information about the investments, including performance and fees, declined to comment on the Supreme Court decision.
Intel had $20 billion in DC assets as of Sept. 30, according to Pensions & Investments data.