PLANSPONSOR - February/March 2020 - 2

INSIGHTS
Reading the Required Disclosures
T
" To me,
this ruling,
flies in the
face of
all of the
contracts
we enter
into every
day ... "
he Supreme Court ruling in Intel Corp. Investment Policy Committee v. Sulyma made me shake
my head, as I'm not yet sure what to make of it all, or how it will affect our industry. In the
case, plan participant Christopher M. Sulyma sued on behalf of two proposed classes of participants
in the Intel 401(k) Savings Plan and the Intel Retirement Contribution Plan, claiming the
defendants breached their fiduciary duties by investing plan assets in risky and high-cost hedgefund
and private equity investments through custom-built target-date funds (TDFs).
After the 2008 financial crisis, Intel had further diversified its custom TDFs-the plan's qualified
default investment alternative (QDIA)-by adding alternatives. Plaintiffs said these caused the
TDFs to underperform peer funds because they lagged the equity market when it came back.
The question about the actual allocation is for another day; this decision means the lawsuit may
continue. What the Supreme Court had been asked to rule on was whether Sulyma could sue. Here's
why that decision was needed: Lawsuits alleging a fiduciary breach against a plan have to, generally,
be filed by one of two end dates: either six years from " the date of the last action [that] constituted a
part of the breach or violation, " or, if a plaintiff has or gains " actual knowledge " of the breach, three
years from the " earliest date on which [he] had actual knowledge of the breach or violation. "
Because Sulyma worked at Intel from 2010 through 2012 and filed the lawsuit in 2015, Intel said
it had been more than three years between the time the investment decisions of the plan fiduciaries
initially were disclosed to him and when he filed suit, therefore the suit was time-barred.
As you'd have expected, Sulyma had received or been directed to numerous disclosures as a
participant. But he testified that he didn't remember receiving the disclosures, that he was unaware
that his money in the plan was invested in hedge funds or private equity. He said he remembered
reviewing the account statements mailed to him, but those didn't describe his underlying holdings.
In its argument, Intel said, once a participant receives a disclosure, he has knowledge because
it is there in his hand, available to him with reasonable effort-i.e., to read it. However, the justices
disagreed with that. " A plaintiff does not necessarily have 'actual knowledge' ... of the information
contained in disclosures he receives but does not read or cannot recall reading. To meet [the statutes']
actual knowledge requirement, the plaintiff must in fact have become aware of that information. " The
opinion notes that, elsewhere in the statute, there is discussion of whether a participant has actual
knowledge or should have actual knowledge that doesn't apply here.
Intel observed that this could lead to a participant denying knowledge of facts, which would
make things more complex for administrators. Yet, even while acknowledging that might be true,
the opinion says there are more complex considerations-including what it might mean for the
Department of Labor (DOL) in its role to sue plans. " Petitioners may well be correct that heeding the
plain meaning of [a statute] substantially diminishes the protection it provides for ERISA [Employee
Retirement Income Security Act] fiduciaries. But if policy considerations suggest that the current
scheme should be altered, Congress must be the one to do it. "
Besides the fact that it's unlikely Congress will suddenly make time to amend ERISA to clarify
the necessary language, I found the interpretation jarring because it runs counter to how we deal with
so much of the information that confronts us in our everyday lives. Yesterday I checked into a doctor's
office and had to " read " the disclosures and scroll to the bottom to check the box saying I'd read and
accepted them, which I did knowing I hadn't read them. To me, this ruling flies in the face of all of
the contracts we enter into every day, whether with medical providers or app providers.
Should a plan sponsor, beyond fulfilling its duty to get required documents to participants, try
to ensure they read them, too? Even if one can prove a document was received, by electronic delivery,
will our industry have to add the " scroll to the bottom and check the box " language on disclosures? Or
are we just resigned to a six-year statute of limitations, knowing full well that most plan participants
don't read what they are given? -Alison Cooke Mintzer, Publisher
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