This “should be the last word in a long-running challenge to the judgment of the fiduciaries of Intel Corporation’s retirement savings plans for including private fund investment alternatives in those plans,” according to attorneys Debevoise & Plimpton. “The key takeaway from the courts’ rulings in this litigation, and the correct answer under ERISA’s fiduciary construct, is that there is no one-size-fits-all approach to asset allocation or investment options that can be made available in participant-directed defined contribution plans.”
Winston R. Anderson, a former Intel employee, and some of his former co-workers originally brought a class action lawsuit under the Employee Retirement Income Security Act (ERISA) against Intel in 2019, alleging that the company’s retirement plan lost billions because trustees breached their fiduciary duty by investing some of the plan’s assets in “high-priced” hedge funds and private equity funds, and their duty of loyalty by steering retirement funds to companies in which Intel’s venture-capital arm, Intel Capital, had already invested. The private funds were underlying investments in custom target-date funds.
However, the District Court for the Northern District of California dismissed Anderson’s claims found that Anderson failed to provide a meaningful benchmark to compare the performance of Intel’s funds and did not plausibly allege a real conflict of interest for the duty of loyalty claim. Then on May 22, the Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal.
“The Intel decision should give some comfort to plan fiduciaries looking to modernize investment options available to their plan participants by providing access to private funds as part of a well-diversified retirement portfolio,” according to Debevoise & Plimpton.
However, the case provides “building blocks to offer professionally managed, diversified funds in which private market investments are a component,” the attorneys suggest, and allows “the possibility that other circuits could apply a more plaintiff-friendly standard.” However, “fiduciaries may still hesitate absent an express statutory or regulatory safe harbor for including professionally managed, diversified fund options in which private market investments are a component.”