Compliance

Court Finds Intel Alternative Investment Suit Time-Barred

The lawsuit claimed the defendants breached their fiduciary duties by investing a significant portion of the plans’ assets in risky and high-cost hedge fund and private equity investments through custom-built target-date funds.

By Rebecca Moore editors@strategic-i.com | April 04, 2017
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A federal district court judge has found that claims against Intel Corporation’s Investment Policy Committee for its retirement plans is time-barred under the Employee Retirement Income Security Act’s (ERISA)’s three-year statute of limitations.

Christopher M. Sulyma filed a lawsuit on behalf of two proposed classes of participants in the Intel 401(k) Savings Plan and the Intel Retirement Contribution Plan, claiming that the defendants breached their fiduciary duties by investing a significant portion of the plans’ assets in risky and high-cost hedge fund and private equity investments through custom-built target-date funds.           

The lawsuit says the Intel custom-built funds have underperformed peer funds by approximately 400 basis points annually. The lawsuit claims automatic enrollment and a reenrollment of existing participants resulted in more than two-thirds of participants being allocated to custom-built investments. It goes into great detail about why the plaintiffs believe hedge funds and private equity funds are inappropriate investments for ERISA retirement plans.

Intel defendants moved for summary judgment on all of Sulyma’s claims, arguing that the claims are time-barred under the statute of limitations. U.S. Magistrate Judge Nathanael M. Cousins of the U.S. District Court for the Northern District of California noted that the key issue is whether Sulyma had actual knowledge of the underlying facts constituting his claim within three years of filing his lawsuit.

Sulyma brought six claims: claims I and III allege the Investment Committee defendants breached their fiduciary duties by over-allocating the assets of the 401(k) Plan and Retirement Plan to hedge fund, private equity, and other alternative investments. Claims II and IV allege the Administrative Committee defendants breached their fiduciary duties by failing to disclose required information about the funds. Claim V alleges that the Finance Committee defendants breached their fiduciary duties by failing to monitor the Investment Committee and Administrative Committee. Claim VI alleges that each defendant has derivative liability for the actions of the other defendants.

“Because there is no genuine dispute of material fact that Sulyma had actual knowledge of the facts comprising claims I and III, as well as knowledge of the disclosures he alleges were unlawfully inadequate in claims II and IV, the Court grants defendants’ motion for summary judgment on those claims, finding them time-barred,” Cousins wrote in his opinion. “Without live primary claims, the Court also grants summary judgment on Sulyma’s derivative duty to monitor and co-fiduciary liability claims (claims V and VI).”

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