By Christopher B. Tobe — The CommonSense 401k Project
On Tuesday, October 6, the Supreme Court will hear oral argument in Anderson v. Intel Corporation Investment Policy Committee. The immediate question concerns what workers must allege before a lawsuit challenging imprudent retirement investments can proceed. The practical stakes reach much further: can fiduciaries place workers’ savings in complicated private investment structures, then use those structures’ uniqueness to make accountability harder?
Tuesday is the argument, not the decision. But the choice taking shape deserves public attention. Supreme Court docket
Private equity’s representatives understand the stakes. The American Investment Council and Managed Funds Association filed a brief supporting Intel. They argue that affirming the meaningful-benchmark standard would reduce litigation risk and encourage alternative investments in 401(k)s. They portray litigation as an obstacle to workers receiving better returns and diversification. I see a different danger: making accountability harder can make expensive products easier to sell. Industry brief
The retirement industry’s sales opportunity is clear. The participant’s benefit still needs to be demonstrated.
The Court already explained who bears the loss
In Thole v. U.S. Bank in 2020, the Court’s majority denied standing to DB pensioners whose fixed benefits had been paid and would remain the same regardless of the lawsuit’s outcome. Justice Kavanaugh expressly contrasted those benefits with 401(k) accounts, whose value depends on investment decisions.
Your employer generally bears the funding obligation for a traditional DB pension. In a DC plan, investment losses and excessive investment costs reduce the account supporting your retirement.
Justice Sotomayor’s dissent, joined by Justices Ginsburg, Breyer and Kagan, argued that beneficiaries had an enforceable interest in their retirement trust’s financial integrity. She warned against preventing pensioners from challenging mismanagement until pensions approached default. The dissent emphasized trust protections, fiduciary duties and participants’ ability to enforce them. Majority and dissent
Thole did not grant automatic standing for every DC claim, and it was not a ruling specifically about private equity losses. But its economic distinction matters: a worker whose own account suffers investment harm presents a different situation from a pensioner whose fixed payment is unaffected.
Intel shows how the pension structure reaches the 401(k)
Intel’s filings provide a concrete example. Its 2015 401(k) report described a master trust containing assets of the 401(k), Retirement Contribution Plan and Minimum Pension Plan. Automatically enrolled participants’ deferrals went into target-date funds investing in master trust accounts. The underlying investments included hedge funds and private equity, venture capital, private credit and other private assets. Some closed-end holdings could not be redeemed on a presently determinable date. Intel’s 2015 filing
The structure later changed. Intel’s 2019 report states that investments moved into units of proprietary collective investment trust funds in January 2018. The master trust was dissolved in January 2019, with the 401(k)’s interests transferred to a separate trust. The report identified all three plans as participating in the CIT trust. Intel’s 2019 filing
That history matters. A participant can hold an interest in a target-date fund, which holds pooled investment interests, which ultimately expose the worker to private funds and their contractual terms.
These filings disclose the structures; they do not prove intentional concealment. My concern is that reporting an investment as units in a pooled vehicle can leave the underlying economics several layers away from the worker trying to understand them.
Pooling DB and DC investments does not pool the employer’s promise to pay a fixed pension. The 401(k) participant still bears the account’s investment results.
A benchmark can help—or protect the decision being challenged
Intel defended its strategy as a way to reduce volatility and downside risk. The Ninth Circuit found the plaintiffs’ comparisons inadequate because the proposed comparator funds had different objectives and risks. Judge Berzon’s concurrence nevertheless stressed that an empirical comparator is not universally required to plead imprudence. Ninth Circuit opinion
Fair comparisons matter. A stock-heavy fund’s higher return during a bull market does not, by itself, establish that a more conservative portfolio was imprudent.
But a benchmark built around the challenged allocation answers a limited question: how did the selected allocation perform against a representation of itself? It does not necessarily answer whether choosing that allocation was prudent for participants in the first place.
If the complaint challenges substantial private equity exposure, requiring a comparator with substantially the same exposure risks assuming the wisdom of the decision under challenge.
A custom strategy should face meaningful evaluation of its total costs, liquidity, valuation practices, conflicts and expected benefits. Its uniqueness should not become a shield.
Workers need a fair path to the evidence
Committee records, manager agreements, fee arrangements and the analysis supporting a private investment allocation can be essential to evaluating prudence. Workers ordinarily have far less access to those materials than fiduciaries and their advisers.
A pleading rule should require facts supporting a plausible claim. It should also recognize where the evidence resides. Demanding a near duplicate investment before discovery can make the most complicated arrangements the hardest to challenge.
My earlier CommonSense articles warned about secrecy and benchmarks and corporate relationships that can compete with participants’ interests. Intel brings those concerns to the courthouse door.
The Court should preserve a realistic path for workers to challenge plausibly imprudent decisions and obtain the evidence needed to evaluate them. That would not predetermine Intel’s liability. It would preserve accountability.
Private equity managers want access to workers’ retirement savings. Workers deserve access to an effective process for protecting those savings.
The Supreme Court already recognized in Thole that 401(k) participants bear the investment consequences. It should ensure that they also have a fair opportunity to enforce the fiduciary protections that accompany them.
