Former Intel Plan Participant Reiterates His Claims

Now that the U.S. Supreme Court has decided the ‘actual knowledge’ issue, perhaps the industry will get a court ruling about the use of alternative investments in TDFs.

A former participant in two retirement plans sponsored by Intel Corp., whose original Employee Retirement Income Security Act (ERISA) lawsuit was heard by the U.S. Supreme Court, has reiterated his claims, joining another suit questioning underlying investments in the plan’s target-date funds (TDFs).

Christopher M. Sulyma joined a lawsuit filed in August 2019 by Winston R. Anderson. During Sulyma’s original case filed in 2015, Intel argued that the lawsuit was not filed within ERISA’s shorter three-year statute of limitations, which it said applied because Sulyma had “actual knowledge” of the use of the underlying investment options in the TDFs. Intel based its “actual knowledge” argument on the fact that investment disclosures were posted on a website that Sulyma had visited.

In February, the Supreme Court ruled that although ERISA does not define the phrase “actual knowledge,” its meaning is plain. Actual knowledge is only established by genuine, subjective awareness of the relevant information being considered—not by the mere possession of documents or the theoretical availability of information in print or digital disclosures sent to would-be litigants, the high court said.

The combined lawsuit challenges the use of hedge funds and private equity investments as underlying funds in custom TDFs offered in Intel’s defined contribution (DC) retirement plans. It claims that the defendants breached their fiduciary duties by investing a significant portion of the plans’ assets in risky and high-cost hedge fund and private equity investments.

In June, the Department of Labor (DOL) issued an Information Letter, saying “a plan fiduciary would not, in the view of the department, violate the fiduciary’s duties under Sections 403 and 404 of ERISA solely because the fiduciary offers a professionally managed asset allocation fund with a private equity component as a designated investment alternative for an ERISA covered individual account plan.” The letter included five paragraphs detailing considerations for plan fiduciaries in evaluating and monitoring the investments.

Retirement industry stakeholders will be watching to see whether and how the DOL letter effects the outcome of the case.