That could be important for the many retirement plan participants who have a stack of important-looking documents or a tangle of bookmarked links that we mean to tackle someday to figure out what’s really happening with the nest egg.
INTEL CORP. INVESTMENT POLICY COMMITTEE v. SULYMA
Christopher Sulyma worked at Intel from 2010 to 2012, during which he participated in two ERISA plans: the Intel Corporation 401(k) Savings Plan and the Intel Retirement Contribution Plan. In 2015, various news reports began to suggest that the fiduciaries of the plans had invested plan assets in risky, expensive investments that cost plan participants much of their anticipated retirement benefit.
Sulyma filed a class action lawsuit alleging that the plans’ fiduciaries had violated their duty to act prudently in the interest of plan participants as required by ERISA.
Intel countered that the lawsuit was too late, that the filing fell outside of ERISA’s statute of limitations because Sulyma had had access to information about the plans’ investment decisions for more than three years before he filed the Complaint. Sulyma insisted that he had not read the online “Fact Sheets” that would have disclosed the relevant information. The “Fact Sheets” were not directly provided to him, but were cross-referenced in the legally-required summary information that the plan fiduciaries had distributed.
The District Court agreed with Intel and dismissed the lawsuit. Sulyma appealed. The Ninth Circuit reversed the District Court decision. Intel sought certiorari, which the Supreme Court granted. What began as a breach of fiduciary duty case will be heard in the Supreme Court in December as a statute of limitations case.
The AARP, the Pension Rights Center and now the Solicitor General of the United States have filed amicus briefs in support of Sulyma. The Solicitor General has asked for permission to participate in oral argument, as well.
This is no mere side skirmish. The Court’s decision about the length of time within which ERISA lawsuits must be brought may ultimately have longer lasting consequences for plan participants than the initial question about the wisdom of certain kinds of plan investments.
ACTUAL KNOWLEDGE OR CONSTRUCTIVE KNOWLEDGE – THE LONG AND SHORT OF IT
ERISA's statute of limitations for breach of fiduciary duties bars actions commenced after the earlier of either:
- 6 years after the act or omission constituting the breach, or
- 3 years "after the earliest date on which the plaintiff had actual knowledge of the breach."
Actually, although some of the legal arguments do appear to be headed straight for the philosophical weeds, an argument that the Court may find more compelling has to do with the legislative history of that section of ERISA.
As noted in Sulyma’s Supreme Court brief, other ERISA limitations periods start the three-year clock when the plaintiff “acquired or should have acquired actual knowledge,” of a breach of fiduciary duty. As originally enacted, the relevant section of ERISA used to include this “should have acquired” language (also referred to as a “constructive knowledge” standard). Congress, however, amended the law to remove that phrase in 1987.
The inference to be drawn, the brief suggests, is that “actual knowledge” means just that. A plan participant have actually have read and understood the relevant disclosures in order for the clock to start running on the shorter time limit. Intel has not disputed Sulyma’s assertion that he did not read the online “Fact Sheets.”
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The original constructive knowledge standard was more fiduciary-friendly because it allowed courts to impute knowledge to plan participants. The 1987 amendment appears to be a deliberate effort to re-balance interests by retaining the possibility of a shorter three-year time limit, but requiring actual knowledge of a fiduciary breach.
If Congress wants to re-balance interests again, the argument will be advanced, it can do so legislatively; but this is not a task for the court system. The December arguments should be interesting and the ultimate decision may prove a harbinger of things to come for ERISA fiduciary litigation.