A plan sponsor who had been sued for allegedly breaching its ERISA fiduciary duties in shifting allocations in a plan’s custom target-date portfolios to “risky and high-cost” investments has won its case in court.
The original lawsuit, filed in November 2015 in the U.S. District Court for the Northern District of California by former Intel employee Christopher Sulyma, had charged that Intel’s investment committee boosted the $6.66 billion profit-sharing plan’s allocation for hedge funds in the firm’s target-date portfolios from $50 million to $680 million, while at the same time the allocation for hedge funds in the diversified global fund rose from $582 million to $1.665 billion, and to private equity investments from $83 million to $810 million, between 2009 and 2014.
The suit claimed that participants were not made fully aware of the risks, fees and expenses associated with the hedge fund and private equity investments, or to the underperformance of the company’s target-date and global diversified funds compared to their peers, and that as a result participants “suffered hundreds of millions of dollars in losses during the six years preceding the filing of this Complaint as compared to what they would have earned if invested in asset allocation models consistent with prevailing standards for investment experts and prudent fiduciaries.”
However, the defendants moved for summary judgment on all of the claims, arguing that the claims are time-barred under the statute of limitations. According to United States Magistrate Judge Nathanael Cousins then, the key issue is whether Sulyma had actual knowledge of the underlying facts constituting his claim within three years of filing his lawsuit.
Judge Cousins noted that while he was an Intel employee, Sulyma had access to a number of financial documents, including plan documents, fund facts sheets and summary plan descriptions, which included information about plan asset allocations and an overview of the logic behind the investment strategy. This access gave Sulyma “actual knowledge” of the alleged violations three years before he sued, according to Judge Cousins, and therefore “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,” he granted as time-barred the defendants’ motion for summary judgment on those claims.
The case is Sulyma v. Intel Corp. Inv. Policy Comm., 2017 BL 106910, N.D. Cal., No. 5:15-cv-04977, 3/31/17.
