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

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

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

The plan was loaded with allegedly expensive, under-performinginvestment options — including alternative asset classes — andfiduciaries failed their obligation to monitor the investmentsunder ERISA.

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

Under that provision, a lawsuit against a plan sponsor has to bebrought within 3 years from "the earliest date on which theplaintiff 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 companybetween 2010 and 2012, brought his suit outside the 3-year limit,the district court found.

When deposed, he admitted to visiting the company portal thathosted 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 enoughto satisfy the statute of limitation's "actual knowledge"provision.

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

In its decision, the Ninth Circuit conceded that Intel hadprovided all the information necessary for the plaintiff to makeinformed investment decisions, explained Delany.

"It's undisputed that the participant had sufficientinformation," he said. "In a lot of ways, ERISA is a disclosurestatute. The case boils down to whether having constructiveknowledge—access to the plan documents—is enough to satisfy the3-year statute of limitation."

Implications if SCOTUS rules against Intel

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

"It would mean that it would not be enough to provide plandocuments, 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-yearlimitation period."

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

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

"This one is a close call," thinks Delany. "ERISA cases caninspire odd alliances on the court. On the one hand, you wouldthink liberal justices would lean for participants, andconservative justices for employers and fiduciaries. But theconservative justices tend to be more strict statutoryconstructionists, meaning they tend to interpret the text as it iswritten."

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

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

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

The Supreme Court's decision in Intel Corp. Investment PolicyCommittee v. Sulyma is expected to be released in the spring of2020.

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