On October 6, 2026, the United States Supreme Court heard oral arguments in Anderson v. Intel1. The nation’s highest court considered the question of whether, when alleging a plan fiduciary breached its duty of prudence under ERISA based on fund underperformance, a plaintiff must allege a “meaningful benchmark” against which to compare the allegedly underperforming fund. Encore’s Fid Guru Blog has written about the development of this case on many occasions, most recently a few weeks ago in The Meaningful Benchmark Standard: What It Is, Why It Matters, and What Is at Stake in Anderson v. Intel. The Court’s ruling is crucial for plan sponsors of ERISA retirement plans who remain under attack by plaintiff firms that, with the benefit of hindsight, cherry-pick through plan investment lineups looking for underperforming investments to use as a basis to allege a breach of fiduciary duty.
This article highlights some notable developments from the oral arguments and forecasts what is next, including our optimism that the justices will uphold the Ninth Circuit’s decision requiring a meaningful benchmark by plaintiffs at the pleading stage.
Background
The case is on appeal from the Ninth Circuit, which affirmed the district court’s dismissal of the case and held that a meaningful benchmark is required in underperformance cases. The Ninth Circuit found that the requirement for a meaningful benchmark is “implicit in ERISA’s text” because comparing an investment to a dissimilar benchmark tells a court nothing about whether the challenged investment itself was imprudent. As additional context, the plaintiffs in this case challenged Intel’s decision to alter the allocation of its proprietary, customized suite of target date funds and global diversified fund to incorporate alternative assets as a deliberate risk-mitigation strategy following the 2008 financial crisis. During the subsequent bull market period, Intel’s funds generated lower returns than other available funds that had vastly different investment strategies, which plaintiffs used as comparator funds within their complaint.
A circuit split has developed on this issue, with the Second, Seventh, Eighth, and Tenth Circuits joining the Ninth Circuit in holding that a meaningful benchmark is required, either in the context of excessive fee or underperformance claims. The Sixth and Eleventh Circuits, on the other hand, have held that a meaningful benchmark is not required in the context of underperformance claims.
Davis & Harman filed an amicus brief in this case on behalf of the American Benefits Council saying that a comparison to a meaningful benchmark is necessary, but is not nearly enough to sustain an imprudence lawsuit.
Encore Fiduciary similarly filed an amicus brief in the Supreme Court case Parker-Hannifin Corp. v. Johnson (No. 24-1030) in support of the plan sponsor and fiduciaries, opposing the Sixth Circuit’s ruling which held that plaintiffs did not need to allege a meaningful benchmark at the initial pleading stage to survive a motion to dismiss. The Supreme Court ultimately did not agree to hear that case, but the legal issue behind it is the same as in Anderson v. Intel.
Key Considerations from Oral Arguments
Solicitor General Supports Intel
The Solicitor General for the United States (SG), having submitted an amicus brief supporting the defendants, was permitted to participate in oral arguments along with the parties. The attorney arguing on behalf of the SG noted that the SG had no disagreements with the defendant’s positions.
Support for Ninth Circuit’s Meaningful Benchmark Standard
Multiple justices expressed agreement with the Ninth Circuit’s ruling in this case. Justice Thomas, for example, noted that the Ninth Circuit appropriately held that an underperformance complaint cannot compare dissimilar funds. The plaintiffs’ attorney’s main argument in this regard was that the Ninth Circuit went too far by requiring plaintiffs to identify a “materially indistinguishable” fund against which to compare the allegedly underperforming fund.
Echoing Justice Thomas’ support for the Ninth Circuit’s meaningful benchmark standard, Justice Alito stated that none of the plaintiffs’ arguments represent a basis for throwing out the Ninth Circuit’s approach. Justice Kagan stated that she views the Ninth Circuit’s ruling as a “pretty reasonable decision.”
The plaintiffs’ attorney also argued that the problem with the Ninth Circuit’s decision was that the court should have adopted a “holistic” analysis of the complaint. The plaintiffs’ attorney explained that, outside of the underperformance allegations, the complaint in this case lays out that the plan’s purported risk mitigation strategy could not be accomplished by an over-allocation into hedge funds (because they are often volatile and do not mitigate risk). According to the plaintiffs’ attorney, the allegations that the challenged funds underperformed corroborate the non-performance allegations challenging the nature of the defendant’s investment strategy. In the plaintiffs’ view, the performance and strategy allegations should have been considered together, not separately. The justices generally expressed the view that the Ninth Circuit appropriately considered both allegations.
Justice Kagan asked the attorney arguing for the SG for her thoughts on the Ninth Circuit’s meaningful benchmark standard. The attorney noted that the SG agrees with Ninth Circuit’s decision.
Apples-to-Oranges Fund Comparisons
During the plaintiffs’ attorney’s argument, the justices expressed skepticism over how a complaint alleging underperformance could show that a fiduciary acted imprudently by comparing dissimilar funds. Justice Thomas, for example, stated that the Ninth Circuit held that an underperformance complaint cannot compare apples and oranges – for example, comparing an equity fund that is designed to produce higher but riskier returns against a fund that is designed to protect against losses. Similarly, Justice Kagan stated that what the Ninth Circuit’s ruling says is that a comparator fund does not have to be precisely the “same apple,” with precisely the same color and texture, but it must be an apple.
Justice Gorsuch pressed the plaintiffs’ attorney on whether he agreed that a meaningful benchmark of some kind must be required – the attorney ultimately agreed that an inherent comparison needs to occur. In addition, he stated that, in the context of the specific question presented to the Court – i.e., when dealing with underperformance allegations, do apples need to be apples for purposes of a comparison? – he is hearing that the answer to that question is “yes.”
Justice Sotomayor asked questions about how the Court should define what kind of “apple” should be compared to a challenged fund. She also explained that it is not clear where in the plaintiffs’ complaint the plaintiffs identify an appropriate comparator – that is, funds that also have a risk mitigation strategy but do not invest in hedge funds. Justice Coney Barrett noted that the plaintiffs seem to agree with the defendant that some type of benchmark is required, but the parties are fighting over what is meaningful.
Why Underperformance is Insufficient to Show Imprudence
Justice Kavanaugh asked questions focusing on why underperformance matters, in the sense that half of all funds are going to underperform or be lower than the median. Justice Kavanaugh stated that it seems that the plaintiffs’ complaint is really about challenging the strategy of “going low-risk” or the means to achieve that strategy (i.e., investing in hedge funds), and he does not know why underperformance has anything to do with that. Justice Kavanaugh stated that the question ERISA asks in this case is whether the allocation to hedge funds was an unreasonable means to achieve the goal of risk mitigation, and the Ninth Circuit concluded that the answer was no.
Justice Kavanaugh also pointed out that a plan could have a terrible strategy that nevertheless works well, or a good strategy that ends up losing because of the way the market turns. Given this point, then, he is unsure why underperformance is relevant in the question of whether there was a fiduciary breach.
Similarly, Justice Gorsuch asked the defendant’s attorney about whether underperformance could ever be enough to show fiduciary imprudence. The defendant’s attorney replied that underperformance will rarely be indicative of imprudence.
Focus on Scope of Court’s Forthcoming Ruling
During the defendant’s argument, the justices largely focused on how narrow the Court’s ruling in the case should be, rather than focusing on whether a meaningful benchmark is required in the first place. For example, Chief Justice Roberts asked the defendant’s attorney about how narrowly-defined a meaningful benchmark standard should be. Justice Coney Barrett asked whether the Court should answer the question of whether a meaningful benchmark is required in underperformance cases with a simple “yes,” or whether the Court should explain what “meaningful” means. The defendant’s attorney answered that lower courts have already been successfully defining what a meaningful benchmark is, so there is no need for the Court to define it. Justice Coney Barrett also asked whether the Court should define a meaningful comparator fund as one with like aims and strategies to the challenged fund, or whether further direction is needed for lower courts. The defendant’s attorney said that it would be helpful for the Court to define a comparator as a fund with like (but not identical) aims and strategies.
Justice Alito was interested in the defendant’s position on whether a complaint could provide a meaningful comparison if it relied on experts on portfolio management that have analytical tools to measure investment returns on a risk-adjusted basis. The defendant’s attorney said that such reliance could provide a meaningful comparison in some circumstances. Justice Alito asked the attorney arguing on behalf of the SG how much guidance would be prudent to provide in this case. The SG’s attorney stated that some parameters for what would constitute a meaningful benchmark would be appropriate. She also noted that prudence is about a fiduciary’s process, not performance.
Justice Kagan expressed concern that, if the Court does not say anything about how to define a meaningful benchmark, it will leave questions open as to how the standard should be applied. She explained that when she looks at some of the lower courts’ rulings, there is a range of ways in which the courts have approached the issue. She said that some of the lower courts have suggested that a plaintiff needs a comparator fund with the same asset allocations as the challenged fund – for example, unless the comparator invests the same percentage of assets in international funds, the court will strike the plaintiffs’ comparator. In Justice Kagan’s view, that goes too far by requiring identical comparators.
Discussion of Private Equity & Hedge Funds
Justice Alito asked the plaintiffs’ attorney whether a plaintiff could state a claim by comparing apples-and-oranges funds but supplementing that claim with the suggestion that the fiduciary’s strategy was flawed. He noted that the plaintiffs’ brief denigrates the strategy of reliance on private equity and hedge funds, despite the question presented in this case focusing on underperformance. The plaintiffs’ attorney admitted that the complaint does not challenge as an entire category the ability of fiduciaries to invest in hedge funds or private equity. Rather, according to the plaintiffs’ attorney, the complaint challenges the particular strategy adopted by the Intel fiduciaries. Justice Kavanaugh noted that the use of hedge funds is common by many funds seeking to mitigate risk.
Key Takeaways
Our takeaway from oral arguments is that the Democrat-appointed and Republican-appointed justices were united in expressing skepticism of the plaintiffs’ arguments. The justices’ questions and comments during the defendant’s and Solicitor General’s arguments indicated that the justices were focused on the scope of a future ruling, rather than whether a meaningful benchmark is required at all. It seems likely that the justices will uphold the Ninth Circuit decision to require a meaningful benchmark.
Left unclear are two points:
- First, to what extent will the Court attempt to define what constitutes a meaningful benchmark?
- Second, two justices – Kavanaugh and Gorsuch – expressed doubt about whether past underperformance alone, even compared to a meaningful benchmark, should ever be enough to show fiduciary imprudence. The justices’ discussion indicates that they will not address that issue in full but simply noting that it is an open question in the majority opinion would is important.
Except in the Sixth and Eleventh Circuits, winning on the need for a meaningful benchmark does little to improve the current state of underperformance litigation, since almost all suits allege a comparison to an allegedly meaningful benchmark. Winning just prevents the chaos that would ensue if apples (such as funds with risk mitigation strategies) could be compared to oranges (such as funds without such strategies).
The key to the effectiveness of the Supreme Court decision is the extent to which the majority opinion references – without deciding – the skepticism of Justices Kavanaugh and Gorsuch that past underperformance compared to a meaningful benchmark alone is enough to sustain a suit. If underperformance alone can be enough, then all plans not choosing the highest performing fund based on past performance will be vulnerable to underperformance suits. To avoid this scenario, plans would be forced to chase the hot fund by buying high and selling low, and thus hurting participants. Requiring an actual abuse of discretion in fulfilling a fiduciary’s duties – not just a hindsight comparison of investment performance without any insight into a fiduciary’s process – would set a pleading standard that weeds out frivolous litigation.
Justin Bove is the Chief Revenue Officer & Fiduciary Product Lead for Encore Fiduciary. He can be reached at jbove@encorefiduciary.com.
Footnotes
- Both a recording and transcript of the oral arguments are available.
