When investment options in 401(k) plans perform poorly, plan fiduciaries risk getting sued. The U.S. Supreme Court this term is expected to resolve a circuit split about whether plaintiffs alleging imprudent investment based on underperformance must plead a meaningful benchmark to survive the motion-to-dismiss stage, according to DeMario Carswell, an attorney with Miller & Chevalier in Washington, D.C.
The upcoming ruling in the case (Anderson v. Intel Corp. Investment Policy Committee) matters because “if the court determines that a meaningful benchmark is not required at the pleading stage, plans will face heightened litigation risk and plaintiffs will have a significantly easier path to challenging investment selections,” he said.
The plaintiff brought the case against the fiduciaries to recover on behalf of the plan all losses related to the selection and retention of poorly performing investment options, said Charles Field, an attorney with Sanford Heisler Sharp McKnight in San Diego, which represents employees.
The investment options were a suite of target date retirement funds that allegedly invested in an assortment of “risky, unregulated nonpublic funds” — including hedge funds and private equity funds, he said.
However, the 9th U.S. Circuit Court of Appeals agreed with the district court that the plaintiff failed to plausibly allege a fiduciary breach, partly because the alternative investment options offered as performance comparators were...
Welcome to Reality Check, NewsGuard’s nonpartisan newsletter that tracks the false claims and conspiracy theories that shape our world — and who’s behind them. Please support us by becoming a premi...