Supreme Court Reviews Case on Retirement Fund Responsibilities

The Supreme Court is considering a case that may influence the evaluation of employer-sponsored retirement funds when they underperform. This case, Anderson v. Intel, examines if Intel acted irresponsibly in managing its employees’ retirement funds. The plaintiffs claim the company’s fund performed poorly compared to others, reducing employees’ retirement savings. Intel counters that underperformance does not inherently indicate irresponsible management.

Justice Neil Gorsuch advised caution among justices regarding whether underperformance should determine company responsibility. During oral arguments, Gorsuch emphasized not addressing the significance of underperformance in claims of prudence or imprudence. He urged justices to examine how to benchmark when assessing a fund’s responsibility.

“We should take care to bracket that question about the relative importance of underperformance in a prudence, imprudence claim. We’re not going to answer that question,” Gorsuch stated.

This case revolves around determining imprudence within the framework of the Employee Retirement Income Security Act (ERISA). ERISA sets standards for retirement and health benefits, focusing on the process rather than outcomes. A fund might earn less than another due to differing strategies, and this does not necessarily imply irresponsibility.

The core issue is establishing the benchmark for imprudence in these situations. During the arguments, Justice Clarence Thomas humorously questioned the comparability of different funds using the “apples and oranges” analogy. Justice Kagan expanded on this by saying that while elements need not be identical, they must be fundamentally similar.

Other justices also stressed the need for comparisons. Justice Gorsuch noted that evaluating underperformance involves comparison, while Justice Amy Coney Barrett explored if a comparator is necessary to sustain claims of underperformance. Intel argued that plaintiffs require a comparable fund to prove ERISA violations and that comparing funds doesn’t indicate irresponsibility.

Conversely, plaintiffs argued Intel’s reliance on hedge funds and private-equity investments negatively impacted performance and needed different handling. They proposed that courts should consider all allegations collectively instead of relying on comparators.

All parties seem to agree on the necessity of a meaningful benchmark, but they dispute what constitutes meaningfulness. The Supreme Court’s decision could affect how workers contest investment decisions in employer-sponsored retirement accounts. If a low bar is set for a “meaningful benchmark,” more lawsuits might arise. Conversely, a high bar could ease dismissing cases pre-discovery.