The U.S. Supreme Court on Tuesday will hear oral arguments in a case that could shape how Americans hold retirement plan fiduciaries accountable for investment decisions. At issue is how easily 401(k) participants can sue plan fiduciaries over alternative investments that lag index funds. The justices will decide whether a participant suing over underperformance has to identify a “meaningful benchmark”—a comparable investment—before the case can proceed.
The case, Anderson v. Intel Corp. Investment Policy Committee, was brought by former Intel employees who allege that plan managers violated the Employee Retirement Income Security Act’s duty of prudence. After the 2008 crash, Intel added hedge funds and private equity to its custom target-date funds. A group of participants sued, arguing that the allocation lagged plainer stock and bond funds while charging higher fees.
A district court dismissed the suit, and the Ninth U.S. Circuit Court of Appeals affirmed, holding that a complaint alleging underperformance has to point to a meaningful benchmark. The U.S. government’s brief supporting Intel argues that the plaintiffs measured those funds against equity-heavy retail funds pursuing different objectives. The Labor Department stated that the strategy plaintiffs seek “would force Intel to make significantly riskier investments for superficially higher returns.”
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing