Last Wednesday, a unanimous U.S. Supreme Court concluded that receipt of participant disclosures and notices does not constitute “actual knowledge” of fees, investment options, and other plan features. Actual knowledge is the test used under ERISA to determine when the shorter three-year limitations period begins to run for an alleged fiduciary breach, instead of the longer six-year period. In Intel Corp. Investment Policy Committee v. Sulyma, the plaintiff filed a class action claim on behalf of participants in two of Intel’s retirement plans, challenging the inclusion of allegedly high-fee hedge fund, private equity, and commodities investment choices. The plans sought dismissal of the claim, noting that the named plaintiff had received emails and various plan disclosures more than three years ago that described the investment options and associated fees.

The Supreme Court affirmed a denial of the motion on the grounds that receipt of the standard disclosures did not constitute actual knowledge under ERISA of the information if the participant did not read the materials. The court focused on the plain meaning of the term “actual knowledge,” concluding that actual knowledge means more than possession of relevant documents or that a plan participant could have learned of the relevant information if he or she had carefully reviewed the plan disclosures.

The Supreme Court left open the ability for plans to prove actual knowledge in the “usual ways” (e.g., plaintiffs being bound by oath during depositions or inference from circumstantial evidence), and the ruling does not preclude the argument that a suing participant exercised “willful blindness” in reviewing and then ignoring plan disclosures. For example, defendants could demonstrate through records that the participant had reviewed electronic information that clearly discloses the plan information that is the subject of the lawsuit.

This decision raises concerns that plan-related litigation will only increase and that the longer six-year statute of limitations will now apply more often. However, plans involved in class action claims may be able to use the discovery process to try to distinguish among participants’ actual review of investment disclosures, and therefore argue that there is insufficient commonality to allow class certification.