The Supreme Court is evaluating a case with potential significant effects on individuals whose employer-sponsored retirement funds fail to perform well. The case, Anderson v. Intel, questions whether Intel acted irresponsibly by how it managed employees’ retirement investments. Plaintiffs claim Intel’s fund yielded less than similar options, negatively impacting employees’ retirement savings. In defense, Intel contends that underperformance does not necessarily indicate negligence in investment decisions.
Justice Neil Gorsuch advised caution regarding the notion that underperformance alone is proof of a company’s irresponsibility. Gorsuch noted, “We should take care to bracket that question about the relative importance of underperformance in a prudence, imprudence claim. We’re not going to answer that question,” during Tuesday’s oral arguments.
Gorsuch emphasized assessing the correct benchmark for fund comparison when determining potential irresponsibility. Newsweek reached out to Intel and Anderson for comments. The central issue is determining imprudence under the Employee Retirement Income Security Act (ERISA), which dictates standards for retirement and health benefits in the private sector.
ERISA emphasizes the process followed by a company rather than just outcomes. A responsible fund might earn less than others due to varying investment strategies, a key argument from Intel’s legal team. Thus, the justices must decide the benchmark for imprudence claims.
During initial arguments, Justice Clarence Thomas questioned Anderson’s attorney on whether apples and oranges could be compared in this context. The attorney acknowledged, while also questioning what defines an apple versus an orange. Justice Kagan later revisited Thomas’ analogy, stating the apple need not be identical in every aspect but must retain its essence.
Other justices, such as Gorsuch, discussed necessary comparisons when underperformance is alleged. Justice Amy Coney Barrett challenged attorneys on whether comparators are essential for substantiating underperformance claims. Intel argued that when alleging ERISA violations, plaintiffs need a fund comparison. They maintained that underperformance does not equate to irresponsibility, since differing strategies are not ERISA violations.
Plaintiffs argued that Intel’s substantial hedge fund and private-equity investments hurt performance and suggested a different management approach. They believe courts should weigh all allegations collectively rather than demand a specific comparator.
While there is consensus on the need for a meaningful benchmark, opinions differ on its definition and significance. The Supreme Court’s decision could impact how readily employees can contest the investment choices of those managing employer-sponsored retirement accounts.
A lower benchmark set by the Supreme Court might increase lawsuit filings. Conversely, a higher standard could favor employers, helping to dismiss cases before discovery stages.