By: Jill E. Hall
On February 26, 2020, the United States Supreme Court issued a significant and unanimous ERISA decision inIntel Corporation Investment Policy Committee v. Sulyma where the Court held that a plaintiff must have actual knowledge of an alleged fiduciary breach to trigger a shorter three-year statute of limitations period. According to the decision, a plan participant does not have actual knowledge of an alleged breach if he or she is not actually aware of information contained in retirement plan disclosures that he or she receives but does not recall reading.
The Court was asked to determine whether the act of providing plan disclosures to plan participants creates “actual knowledge” of a fiduciary breach under ERISA. The Court answered in the negative, holding that the mere provision of plan disclosures to participants does not meet the “actual knowledge” requirement that triggers ERISA’s three-year statute of limitations period. Rather, the participant must in fact have become aware of the information supplied in the documents.
The plaintiff in the case sued administrators of two retirement plans alleging breach of fiduciary duties. ERISA requires plaintiffs to file suit for fiduciary breach after the earlier of: (1) six years after (A) the date of the last act constituting the breach, or (B) in the case of an omission, the latest date on which the fiduciary could have cured the breach, or (2) three years after the earliest date on which the plaintiff had “actual knowledge” of a fiduciary breach. The plaintiff filed suit more than three years after the plan administrators had disclosed their allegedly imprudent investment decisions to him, and the administrators argued the suit was thus time-barred. Although it was not disputed that the disclosures were provided to the plaintiff, he argued that he did not recall reviewing the disclosures or becoming aware of the allegedly imprudent investments. The Court found that “actual knowledge” means just that and ultimately held that ERISA’s six-year statute of limitations period applied to the plaintiff’s claims. Having filed suit within six years from the alleged breach, the plaintiff’s claims survived.
The decision leaves plan administrators who wish to take advantage of the shorter three-year statute of limitations period scrambling to figure out how to prove actual knowledge on the part of plan participants who receive particular disclosures. The Court made clear that its decision does not foreclose an attempt to prove knowledge, including through circumstantial evidence. Mailing paper disclosures, even with confirmations of receipt, may not establish that a participant actually read the disclosure. Sending disclosures electronically may require the recipient to confirm the disclosure was opened. Administrators may even consider requiring participants to acknowledge receipt and understanding of the disclosures. Even utilizing these methods, though, may not be enough to satisfy the high standard set by the Court in holding that actual knowledge means the recipient actually became aware of the information that gave rise to the alleged breach.