Plaintiffs in Long-Lasting Intel Complaint Appeal to Supreme Court

Plaintiffs have appealed to the U.S. Supreme Court after losses in district court and a federal appellate court in their long-running case against Intel Corp., accusing the tech giant of breaching its duty by investing some plan assets into alternative investments. 

Intel workers who are contesting the private equity investments within their 401(k) plan urged the U.S. Supreme Court to reevaluate the “meaningful benchmark” standard used by courts to assess claims of mismanagement in retirement plans. This standard, applied in various ways across circuit courts, requires employees alleging fiduciary negligence to demonstrate that they can identify a comparable alternative that closely resembles the fund or fee structure in question.  

The Supreme Court’s term began October 6. It typically will grant a hearing if four of its nine justices vote to hear the case. 

The decision to file an appeal in Winston R. Anderson et al. v. Intel Corp. Investment Policy Committee et al. is the latest development in a case spanning six years. Most recently, in May, the U.S. 9th Circuit Court of Appeals affirmed the U.S. District Court for the Northern District of California’s ruling that the plaintiffs did not plausibly allege a fiduciary breach under the Employee Retirement Income Security Act. The Supreme Court weighed in previously on the case in 2020, clarifying pleading standards for fiduciary breach claims under ERISA. 

Case Background 

Winston Anderson, a former Intel 401(k) participant, filed his complaint in August 2019, alleging plan trustees breached their duty of prudence by investing plan assets in hedge and private equity funds. He also alleged that Intel favored companies in which its venture capital arm, Intel Capital, held a stake, violating its duty of loyalty. The private funds were underlying investments in custom target-date funds. 

The 9th Circuit upheld the district court’s decision that Anderson did not adequately claim a breach of fiduciary duty. In its opinion, a three-judge panel of U.S. Circuit Court Judges Marsha Berzon, Eric Miller and Lawrence VanDyke emphasized that prudence must be assessed based on fiduciaries’ processes, not outcomes. Since Anderson failed to describe Intel’s investment selection criteria, he relied solely on circumstantial evidence. 

Furthermore, the panel held that Anderson did not convincingly demonstrate that Intel’s funds performed worse than comparable options. Intel had established specific benchmarks for its funds, and Anderson’s comparisons to equity-heavy retail funds were deemed invalid: “mere labels do not establish true comparability,” the judges wrote. 

The decision also referenced a 2020 Department of Labor letter affirming that a fiduciary can include private equity in retirement plans. While a reasonable imprudence claim might hinge on excessive investment in risky assets, the panel found that Anderson did not prove that Intel’s hedge and private equity investments were overly risky. 

Moreover, the 9th Circuit found no “real conflict of interest” regarding the duty of loyalty, as Anderson could not demonstrate any substantial influence from Intel on investment decisions by firms involved with its startups. 

Waiting for Regulations 

The 9th Circuit’s decision was released in May, and President Donald Trump issued an executive order in August encouraging regulators to offer guidance aimed at reducing the regulatory burden that may expose plan sponsors to litigation risks similar to those faced by Intel. In alignment with Intel’s strategy of utilizing private funds, there is a strong expectation that TDFs will serve as the primary investment vehicle for holding these assets, with projected allocations of 10% to 15% of fund assets directed towards private funds. 

Regulators are currently expected to deliver this guidance by February, but the government shutdown risks delaying that timeline. Whenever guidance comes, industry insiders anticipate that its impact on the inclusion of alternative investments in DC plans will be gradual.