The Supreme Court appeared inclined to side with Intel in Anderson v. Intel, a case about claims that private funds in the company’s 401(k) plan underperformed. At arguments on Oct. 6, justices questioned whether participants can sue over weak returns without comparing a fund with a meaningful benchmark. The dispute is not about whether private equity or hedge funds may be offered in retirement plans; it is about what workers must allege to make an underperformance claim.
The case turns on the comparison
A former Intel employee filed the lawsuit in 2019, alleging that fiduciaries acted imprudently by investing in underperforming hedge funds and private equity. The lower courts dismissed the claims, reasoning that poor returns alone do not show a breach of duty without a meaningful way to assess the funds’ performance.
That distinction matters because different investments can be designed for different purposes. During arguments, several justices used a fruit comparison to question whether a higher-risk fund seeking stronger returns can fairly be measured against one intended to protect against losses. The plaintiff’s attorney, Matthew Wessler, argued that the allegations should be considered together, including claims about the investment strategy and how it was implemented.
Justices press for a meaningful benchmark
Justice Clarence Thomas used the apples-and-oranges analogy to describe why unlike strategies may not provide a sound comparison. Justice Elena Kagan also indicated that a useful comparison would require “another apple,” while Justice Neil Gorsuch asked whether underperformance claims require a meaningful benchmark of some kind.
Justice Samuel Alito challenged Wessler to explain whether a claim could rely on comparing different kinds of funds and then add an allegation that the strategy itself was flawed. The questions suggested concern that a broad standard could let participants bring claims based on performance differences without a suitable comparator. They did not, however, amount to a final ruling.
Ruling could shape employers’ decisions
The case concerns employer-sponsored defined-contribution plans such as 401(k)s, where participants’ retirement savings are invested through a menu selected by plan sponsors. Employers have been weighing whether to add alternative investments while facing changing government policy and the risk of litigation. The Supreme Court’s ruling could affect how much legal uncertainty they see in offering such options.
Plan sponsors are also waiting for finalized Labor Department rules on alternative investments before changing their investment menus. The asset-management industry is preparing products for the market, but employers may hold back until both the court’s decision and the department’s rules are clearer. The case may therefore influence not only the lawsuit against Intel but also the pace at which private funds appear in workplace retirement plans.
ERISA leaves room for debate
The Employee Retirement Income Security Act of 1974, or ERISA, does not specifically address alternative investments in 401(k) plans. The legal question is instead how fiduciary duties apply when a participant alleges that a plan’s investment choices performed poorly. A requirement for a meaningful benchmark could give courts a more defined way to assess such claims.
Aimee Brown, assistant to the Solicitor General, urged the justices to provide “some parameters” for what qualifies as a meaningful benchmark. She also emphasized that prudence concerns the decision-making process, not performance alone. That framing leaves employers and participants focused on both how investment decisions were made and whether the comparison used to challenge them is appropriate.
Private-fund access remains unsettled
The justices’ apparent skepticism points toward affirming the Ninth Circuit’s dismissal, but the court has not issued its decision. If Intel prevails, the ruling could make it harder to pursue claims based only on disappointing returns, particularly where a plaintiff cannot identify a meaningful comparator.
It would not, by itself, require employers to add private equity or hedge funds to 401(k) menus. The investment choices would still depend on plan sponsors’ decisions, the Labor Department’s rulemaking and the fiduciary standards under ERISA. For employers, the immediate question is whether the court’s eventual guidance reduces the litigation risk enough to reconsider options they have so far held back.
Takeaway: The justices appear receptive to Intel’s argument that underperformance claims need a meaningful benchmark, but the final ruling and Labor Department rules remain pending.
References
- securitiesdocket.beehiiv.com — “Supreme Court Signals Skepticism of 401(k) Private Equity Challenge”
- cnbc.com — “Supreme Court weighs 401(k) case about private funds, underperformance”
- Pluang — “Supreme Court hears case on Intel 401(k) plan”
- hallbenefitslaw.com — “President Signals Policy Shift with High Stakes for 401(k) Plans – Hall Benefits Law”
- Yale Law Journal — “Beyond Diversification: The Pervasive Problem of Excessive Fees and "Dominated Funds" in 401(k) Plans”
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