Supreme Court Hears 401(k) Case Over Investment Benchmarks

The Supreme Court of the United States is hearing oral arguments in Anderson v. Intel Corp. Investment Policy Committee to determine the legal requirements for 401(k) participants suing retirement plan fiduciaries. The case centers on whether plaintiffs must identify a meaningful benchmark—a comparable investment with similar risks and objectives—before a lawsuit can proceed.

Former Intel employees allege that the company violated the Employee Retirement Income Security Act's duty of prudence by using hedge funds and private equity that lagged behind simpler index funds. Intel argues that its strategy provided downside protection and that fiduciaries should be judged on their decision-making process rather than subsequent results. The U.S. 9th Circuit Court of Appeals previously affirmed the dismissal of the suit, ruling that complaints must point to a genuinely comparable investment.

Intel is supported by the United States Department of Labor and the Investment Company Institute. The Department of Labor proposed a six-factor safe harbor for fiduciaries regarding alternative assets, while the Investment Company Institute warned that lawsuits based on later underperformance invite defensive conformity among fiduciaries. A ruling in favor of Intel would raise the pleading bar for participants and protect fiduciaries who employ documented, reasoned diversification strategies that may underperform the broader market during rallies.