When Do You Know What You Know? Defining “Actual Knowledge” for Retirement Plan Participants

Retirement Director Ben Rizzuto explains how a key court case may provide clarity on what it means for a retirement plan participant to have “actual knowledge” of a breach of duty. The results should provide guidance to help plan sponsors ensure participants are sufficiently informed of changes to their investment allocations.

Key Takeaways

  • The U.S. Supreme Court recently agreed to hear the Sulyma v. Intel Corp. Investment Policy Committee case, in which plan participants claimed they were not made fully aware of the risks and expenses associated with Intel’s 401(k) plan.
  • The case calls into question how the Employee Retirement Income Security Act (ERISA) defines when a participant has “actual knowledge” of a breach of duty.
  • The outcome will likely have major implications for how plan sponsors ensure that participants receive, read and acknowledge the information contained in their plan documents.

Many of the terms found in the Employee Retirement Income Security Act (ERISA) are open to interpretation. For example, how do we define “reasonable” with respect to fees and expenses? We delved into that topic in a recent Plan Talk podcast episode (Does It Spark Joy?) and determined that ERISA offers no black-and-white definition, leaving the concept of defraying reasonable costs rather murky. Another concept that has received renewed attention recently is that of “actual knowledge,” mentioned in Section 113, the Limitation of Actions portion of ERISA. Specifically, when does a participant (plaintiff) have actual knowledge of a breach or violation of duty?

The answer to this question hinges on the notion of when the clock starts running on ERISA’s three-year statute of limitations. We may get a better idea of what “actual knowledge” entails soon, as the U.S. Supreme Court has agreed to hear the Sulyma vs. Intel Corp. Investment Policy Committee case. The initial claim in this case was that participants were not made fully aware of the risks, fees and expenses associated with allocations made to hedge funds and private equity investments in the plan’s target date funds and global diversified funds, which led to losses over a six-year period.

The case was originally dismissed because Intel claimed that the plaintiffs had access to plan documents and fund facts sheets – which included asset allocation information – for more than three years.

However, on appeal, the 9th Circuit Court reopened the case, ruling in favor of plaintiffs. In that decision, the court defined “actual knowledge” as “something between bare knowledge of the underlying transaction, which would trigger the limitations period before a plaintiff was aware he or she had reason to sue, and actual legal knowledge, which only a lawyer would normally possess.”1

As Intel defendants noted during proceedings, it is exceedingly difficult for the defendants to establish whether the plaintiffs have in fact read the information they received – which means this ruling could open up a can of worms for retirement plan sponsors faced with similar legal action in the future.

Our hope, as always, is that the highest court in the land will eventually provide reliable guidance as to what “actual knowledge” really means. And that ultimately, plan sponsors will be able to draw on that guidance to help ensure participants are appropriately and sufficiently informed of allocation changes and other plan changes.

“Sponsors will need to use multiple different mediums to keep participants informed, including print, email, online, video, in-person and others. After all, knowledge – and in this case, ‘actual knowledge’ – can come in many forms.”

Looking into the future, the outcome of the Sulyma-Intel case could raise other issues that will need to be resolved. For instance, there have been ongoing debates and proposed legislation around the electronic delivery of plan documents. Many have said that electronic delivery is a better option for participants who may prefer online communications for environmental or convenience reasons (or both). It’s also a more cost-effective option for plan sponsors because it saves them the expense of having to print physical copies. In fact, a study from the American Retirement Association and the Investment Company Institute estimated that moving exclusively to electronic delivery could save sponsors approximately $500 million per year.2

The results of the Intel case could slow – or at the very least, change – this entire discussion. More specifically, plan sponsors will want to make certain that participants receive, read and have “actual knowledge” of plan documents and what’s contained in them. But how can sponsors make that determination? Is the best solution to physically deliver the documents to a participant? Or is it more effective to use electronic delivery and require participants to check a box indicating they’ve reviewed the documents?

The larger issue, of course, is how best to communicate with participants to keep them engaged with their goals and on track for a comfortable retirement. And that will depend largely on a plan’s participant population, including the kind of work they do and where and when they do that work.

However, while plan sponsors’ communications may skew toward digital or print depending on the participant population, there is no one right answer. Sponsors will need to use multiple different mediums to keep participants informed, including print, email, online, video, in-person and others. After all, knowledge – and in this case, “actual knowledge” – can come in many forms.


1Supreme Court takes on Intel Case About ‘Actual Knowledge,’ PLANSPONSOR.com. June 13, 2019.
2ARA Study Finds Electronic Delivery of DC Plan Disclosures Can Save Money, PLANSPONSOR.com. June 25, 2018.