Supreme Court: written disclosures not enough to show actual knowledge in ERISA suits

The United States Supreme Court unanimously decided last week that a plan participant who received written disclosures about the plan’s investments, but does not remember reading them, does not necessarily have “actual knowledge” of the content of the disclosures. This is important because ERISA imposes a shorter statute of limitations for suits against a plan fiduciary where a participant has actual knowledge of a breach or violation.

In Intel Corp. Investment Policy Committee v. Sulyma, decided on February 26, 2020, the Supreme Court considered the meaning of language in ERISA’s statute of limitations provisions. ERISA gives participants six years to bring claims alleging a fiduciary breach or violation. But that time is cut to three years if the participant has “actual knowledge” of the breach or violation.

A former employee sued the administrators of Intel’s retirement plans, alleging that they breached their fiduciary duties by over-investing in underperforming alternative assets. Intel argued that the suit should be dismissed because the participant received written disclosures describing the investments more than three years before bringing suit. Intel argued that because the participant had received the disclosures, the participant should be considered to have actual knowledge of the investments, and the shorter three-year statute of limitations should apply.

The Supreme Court disagreed. The Court held that the plain language of ERISA requires actual knowledge, and “to have ‘actual knowledge’ of a piece of information, one must in fact be aware of it.” Because the participant testified that he did not remember reading the disclosures, the participant was not in fact aware of their contents. The Court contrasted the statute of limitations for fiduciary breach with other statute of limitations provisions in ERISA, which require either actual or “constructive knowledge,” and reasoned that if Congress intended the shorter statute of limitations to apply whenever a participant has received written disclosures, Congress would have required only constructive knowledge.

A determination regarding actual knowledge, however, is not as black and white as it appears. In its decision, the Court noted that actual knowledge can be proven in a variety of ways, including through inference from circumstantial evidence. Specifically, the Court said that evidence of receiving written disclosures is relevant, as are electronic records showing that a participant viewed the disclosures and evidence that a participant took action in response to the information contained in the disclosures. The Court concluded by noting that evidence of “willful blindness” may support a finding of actual knowledge.

It is not clear from this opinion what evidence courts will consider sufficient to show actual knowledge or willful blindness, and this will likely be a contested issue in future fiduciary breach litigation. But evidence that participants received written disclosures, without more, is not enough to impose ERISA’s three-year limitations period.