Supreme Court Appears Poised to Require Meaningful Benchmarks in ERISA Underperformance Cases

On October 6, the Supreme Court held oral argument in Anderson v. Intel Corporation Investment Policy Committee, No. 25-498. The case arises under ERISA’s duty of prudence. Petitioners’ theory is that Intel’s fiduciaries overallocated the plan’s target-date funds and a global diversified fund to hedge funds and private equity. Intel answered that it adopted that approach to reduce exposure to losses, at the acknowledged expense of some potential upside. The core issue in this case, as Justice Gorsuch paraphrased it, is whether, “for claims predicated on fund underperformance, a meaningful benchmark is required.” The U.S. Department of Labor recently included the following definition of “meaningful benchmark” in a proposed ERISA safe harbor for investment funds that include alternative assets, like hedge funds and private equity investments: “an investment, strategy, index, or other comparator that has similar mandates, strategies, objectives, and risks to the designed investment alternative.”¹

Petitioners argued that ERISA’s duty of prudence is “inherently flexible” and that the Court has consistently declined to impose judicially crafted bright-line rules at the pleading stage. In their view, the Ninth Circuit’s “meaningful benchmark requirement” is such a rule because it requires a complaint to identify a virtually indistinguishable fund that performed better, failing which the performance allegations are discarded. That approach, petitioners argued, conflicts with Twombly and Iqbal, which require courts to assess all non-conclusory allegations together, in the light most favorable to the plaintiff.

Respondents answered that much of Petitioners’ argument had little to do with the question presented, arguing that ERISA permits fiduciaries a wide range of prudent decisions, including the choice of a more conservative strategy. On the pleading question, Respondent argued that a performance gap alone does not plausibly suggest wrongdoing, because the obvious alternative explanation is that different funds are designed to perform differently. Respondent noted that the Court regularly draws clear lines at the pleading stage, as it did in Twombly, Dudenhoeffer, and Hikma.²

The United States supported Respondents, contending that to support an inference of imprudent implementation, Petitioners must compare Intel’s funds to funds with similar objectives.

Most of the justices seemed skeptical of Petitioners’ position. Justice Thomas opened by asking whether Petitioners were claiming that imprudence could be shown by comparing dissimilar funds, summarizing the Ninth Circuit’s point as “you can’t compare apples and oranges.” Petitioners agreed, but noted the real question is what counts as an apple and what counts as an orange. That metaphor framed much of the remaining argument.

Justice Gorsuch repeatedly returned Petitioners to the question presented. He asked whether Petitioners were shifting ground by effectively conceding that apples must be compared to apples while emphasizing the rest of the complaint. Justice Alito noted that Petitioners’ brief focused heavily on criticizing the investment strategy, which he said sounded like a challenge to strategy rather than underperformance. He also questioned how the strategy and underperformance arguments fit together under a “holistic” approach. Justice Gorsuch suggested that the Court might set aside the broader question of how much underperformance ever matters.

Justice Barrett asked whether deciding if an apple is an apple necessarily requires criteria. She suggested that Petitioners were in fact agreeing that a meaningful benchmark standard is appropriate and disputing only what counts as meaningful. She asked Respondents whether the Court could simply answer the question presented “Yes, period.” She also asked whether defining “meaningful” as “like aims and strategies” might lead lower courts to look for a twin.

Justice Kavanaugh pointed out that half of all funds will perform below the median, and also suggested that the case is really about whether using hedge funds in a risk-mitigation strategy was reasonable, noting that hedge funds are commonly used by funds seeking to mitigate risk.

Ultimately, the questioning suggested that the Court is likely to affirm the Ninth Circuit and hold that, when a claim rests on underperformance, the plaintiff must allege a meaningful benchmark. Justices across the bench described the comparison requirement in similar terms, including Thomas, Kagan, Gorsuch, Barrett, and Jackson. Justice Kagan called the Ninth Circuit’s decision “a pretty reasonable decision.” Much of the later questioning concerned how to write the opinion, including how much guidance to give and how to define “meaningful.”

The scope of the opinion remains the main wild card. Justice Kagan and, to some extent, Justice Sotomayor seemed interested in saying that “meaningfully similar” does not mean “identical,” and that a comparator need not have the same asset allocation. Respondents and the government said they would not object to that guidance. Justice Gorsuch seemed to prefer a narrower ruling that leaves aside how much underperformance can ever matter. He also wanted the opinion to make clear that plaintiffs may plead imprudence in other ways. Regardless of how broadly the Court writes, a ruling for Intel could still leave room for plan participants who plead strategy-based claims, or who can successfully compare their plan’s funds to funds with similar goals.

END NOTES

¹ Federal Register: Fiduciary Duties in Selecting Designated Investment Alternatives

² Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007); Fifth Third Bancorp v. Dudenhoeffer, 573 U.S. 409 (2014); Hikma Pharmaceuticals USA Inc. v. Amarin Pharma, Inc., 608 U.S. ___ (2026).