The plaintiff, a former Intel employee, admitted to visiting the company portal that hosted the retirement plan documents, but testified that he did not "think" he had actually read the plan documents. (Photo: Shutterstock)

The Supreme Court heard arguments today in an Employee Retirement Income Security Act case that has massive implications for plan sponsors and service providers, according to one attorney.

On its face, the allegations raised against the fiduciaries to two Intel Corp. retirement plans are part-and-parcel to the type of "Monday morning quarterbacking" seen in most ERISA claims, says Will Delany, a partner with Holland & Knight.

The plan was loaded with allegedly expensive, under-performing investment options — including alternative asset classes — and fiduciaries failed their obligation to monitor the investments under ERISA.

Intel was able to win summary judgment in a Northern California District Court on the ground that the claims were time-barred under one provision of ERISA's statute of limitations.

Under that provision, a lawsuit against a plan sponsor has to be brought within 3 years from "the earliest date on which the plaintiff had actual knowledge of the breach or violations," according to the statute.

Did he or didn't he read?

The plaintiff in the Intel case, who worked for the company between 2010 and 2012, brought his suit outside the 3-year limit, the district court found.

When deposed, he admitted to visiting the company portal that hosted the retirement plan documents, but testified that he did not "think" he had actually read the plan documents.

In dismissing the case, the district court found that was enough to satisfy the statute of limitation's "actual knowledge" provision.

But on appeal, a Ninth Circuit panel unanimously found in favor of the employee, reversing the lower court decision. The fact that the plaintiff did not recall reading the plan documents meant he did not have "actual knowledge" of the claims he would ultimately bring.

In its decision, the Ninth Circuit conceded that Intel had provided all the information necessary for the plaintiff to make informed investment decisions, explained Delany.

"It's undisputed that the participant had sufficient information," he said. "In a lot of ways, ERISA is a disclosure statute. The case boils down to whether having constructive knowledge—access to the plan documents—is enough to satisfy the 3-year statute of limitation."

Implications if SCOTUS rules against Intel

If the Supreme Court were to side with the Ninth Circuit, the implications would be considerable — not only for plan sponsors, but also investment providers.

"It would mean that it would not be enough to provide plan documents, but sponsors would have to prove participants read them, and perhaps prove that they also understood them," said Delany. "That's a much harder burden of proof to establish the 3-year limitation period."

What the Supreme Court can be expected to do in rendering a decision is to look at the statute and assess the plain meaning of the words "actual knowledge" with the surrounding structure of ERISA, said Delany.

But handicapping how the court will rule is anybody's guess.

"This one is a close call," thinks Delany. "ERISA cases can inspire odd alliances on the court. On the one hand, you would think liberal justices would lean for participants, and conservative justices for employers and fiduciaries. But the conservative justices tend to be more strict statutory constructionists, meaning they tend to interpret the text as it is written."

And ERISA's text of the 3-year limitation is clear: It starts from the time of "actual knowledge."

Delany, who both litigates ERISA claims and counsels sponsors, says some sponsors already require affirmative consent certifying participants have read plan documents.

"If the Supreme Court affirms the Ninth Circuit's decision, you are likely to see more of that," he said. "But whether or not those will be enough to carry the day in court remains to be seen. The challenge is that the plaintiffs hold all the cards. All they have to do is say they did not read the documents."

The Supreme Court's decision in Intel Corp. Investment Policy Committee v. Sulyma is expected to be released in the spring of 2020.

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