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On Wednesday, the Supreme Court handed down a unanimous decision against the fiduciaries of two Intel Corp. defined contribution plans.

At issue before the court in Intel Corp. Investment Policy Committee v. Sulyma was a statute of limitation provision under the Employee Retirement Income Security Act.

The High Court upheld a decision in the Ninth Circuit Court of Appeals, ruling that a plan participant needs "actual knowledge" of a fiduciary breach to trigger a three-year statute of limitation to file suit against a plan sponsor.

In 2015, a former Intel employee filed suit against the plan, alleging fiduciaries mismanaged plan assets by investing in alternative asset classes.

At the District Court level, Intel won a motion to dismiss on the grounds that the claim was brought outside of the three-year window from the time the participant had knowledge of the allegation.

The Ninth Circuit reversed that decision. Throughout the dispute, the plaintiff admitted to receiving plan documents explaining how his savings were invested, as well as visiting the online portal that hosted plan documents.

But he testified that he did not "think" he read the plan documents, which the Ninth Circuit unanimously said was enough to show he did not have "actual knowledge" of the claims he ultimately brought.

A literal interpretation of ERISA

Under ERISA, participants can't sue plan sponsors after the earlier of six years from the time of a fiduciary breach, or three years after the time the plaintiff had "actual knowledge" of the violation, according to the statute.

Writing for the unanimous court, Justice Samuel Alito implied the issue before the justices was easy to answer.

"The question here is whether a plaintiff necessarily has 'actual knowledge' of the information contained in disclosures that he receives but does not read or cannot recall reading," wrote Alito. "We hold that he does not."

While ERISA does not define "actual knowledge," Alito said the meaning is "plain."

"Dictionaries are hardly necessary to confirm the point, but they do," wrote Alito, citing definitions of 'actual' from four sources.

"To have 'actual knowledge' of a piece of information, one must in fact be aware of it," he added.

Alito's brief underscored that the adequacy of Intel's disclosures to the plaintiff was never at question.

"That's what struck me about this case," said Kim Jones, an ERISA attorney and partner at Faegre Drinker. "The individual accessed the information on line numerous time, and they were able to determine he accessed it."

But that he did not "recall" reading the documents, or that he was not aware that his savings were invested in alternative assets, was enough to call into question his actual knowledge.

"I was not surprised by this decision," added Jones. "The court looked at what 'actual knowledge' is. Intel was arguing that constructive knowledge—that a reasonable person should know what was in the plan documents—was enough. But they couldn't get around the fact that 'actual knowledge' is language in ERISA."

A nudge toward electronic disclosures

The decision settles a circuit split on ERISA's actual knowledge provision. And it will have real ramifications for plan sponsors going forward.

"Receipt of a document does not give a participant actual knowledge of what's in it," said Kevin Walsh, a partner with The Groom Law Group.

"Before this case, it was unclear if you needed to get confirmation that a participant has read a document, or if sending a notice was sufficient. The Supreme Court has said it is not," added Walsh.

The ruling also comes in front of a new rule on electronic documents and disclosure, which is expected from the Labor Department this year.

"I think the decision creates another big push towards electronic disclosure," said Walsh. "In a paper world, it's impossible for a sponsor to confirm everyone has read the mail they've been sent."

In reaction to the decision, more sponsors can be expected to include check-the-box disclosures confirming participants' understanding of plan documents, thinks Walsh.

Jones agrees, but fears that would create a "logistical nightmare" for sponsors.

"I don't know if there is a clean way to do that. What if a participant reads a document, but doesn't check the box confirming they did," said Jones, who thinks the decision will encourage "blissful ignorance" among participants.

Alito's brief concedes that the decision may "substantially" diminish ERISA's protections for fiduciaries. He also said ruling in favor of Intel would reduce ERISA's protections for participants.

"Choosing between these alternatives is a task for Congress, and we must assume that the language of (ERISA) reflects Congress's choice," wrote Alito. "If policy considerations suggest the current scheme should be altered, Congress must be the one to do that."

The irony in that assessment? Congress did amend ERISA in 1987 to remove a "constructive knowledge" clause, which would have greatly aided Intel's case.

"There's no easy way for sponsors to address this," said Jones. "Other than trying to take the 'actual knowledge' language out of ERISA."

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