You Must Lead a Horse To Water AND Make Them Drink!

Perhaps it isn’t surprising to you, but I find the Supreme Court’s decision in the ruling against Intel’s investment policy committee to be somewhat shocking. I fear that this decision will result in unintended consequences that will ultimately harm plan participants to a greater extent.

As a reminder, this 6-year-old case has to do with the difference between receiving retirement plan disclosures and having “actual knowledge” of the information. Why the distinction? According to a P&I article, “there is a six-year limit to file ERISA breach lawsuits if the plaintiff does not have actual knowledge and a three-year limit for those who do. The Intel employee, Christopher Sulyma, a participant in two Intel defined contribution plans, “alleged that plan managers violated their ERISA fiduciary obligations by offering too many alternative investments in the plans’ lineups and that disclosures of investment information were inadequate.”

My concern is that this decision may have an adverse impact on fund line-ups and perhaps even the offering of retirement programs in the first place. How are defined contribution investment committees going to insure that not only do plan participants receive the fund information, but they must now determine that the employee has understood what they read? Will there be a test prior to an investment in alternatives or any asset class/product? Will the QDIA have to be cash? Where is the personal responsibility?

Anyone who knows me, knows that I am a huge fan of professionally managed DB plans. Here’s another reason for any sponsor of a DB plan to perhaps maintain them or if the plan has been frozen/terminated a reason to re-start them at this time, which may be the silver lining within this very dark cloud. This is one time that I must stand with Corporate America. The P&I article indicated that “the opinion delivered by Justice Samuel Alito recognized that the Intel investment committee “may well be correct” that the interpretation substantially diminishes the protection that it provides ERISA fiduciaries, but said that if the current scheme should be altered, “Congress must be the one to do it.”” Well, there’s a comforting thought – oh, boy!

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