401(k) private funds case reaches Supreme Court
The Supreme Court heard arguments on a major Intel retirement case that will shape whether employers add private equity and hedge funds to 401(k) plans.
Key Takeaways
- The Supreme Court appears likely to rule in Intel's favour, rejecting claims that underperformance alone proves a breach of fiduciary duty without a benchmark comparison.
- Employers are waiting for both the Court decision and Labor Department rules before adding 401(k) private funds to their plans, creating legal uncertainty.
- Large companies may still avoid 401(k) private funds even if the Court rules favourably, fearing litigation from plan participants and the complexity of managing alternative investments.
The Supreme Court heard oral arguments this week on a case involving Intel’s retirement plan that will determine the future of 401(k) private funds, according to CNBC. The case does not ask whether private equity and hedge funds belong in 401(k)s at all, but rather what legal standard employees must meet to prove their plan sponsor mismanaged the money.
The ruling will directly influence whether employers feel safe offering 401(k) private funds alongside traditional stocks and bonds, and thousands of companies are essentially frozen until the decision comes down.
| Supreme Court oral arguments | Tuesday, 6 October 2026, Anderson v. Intel Corp. Investment Policy Committee |
|---|---|
| Key legal question | Whether underperformance claims require a meaningful benchmark to prove fiduciary breach |
| Labor Department rule | Proposed March 2026, public comment period closed 1 June 2026 |
| Trump executive order | Issued August 2025 to expand access to alternative investments in 401(k)s |
| Expert forecast | Small and mid-size companies likely to adopt 401(k) private funds first, large employers last |
Why the court is fixated on benchmarks
A former Intel employee sued the company in 2019, claiming the plan’s private investments had generated poor returns compared to what should have been available. Intel and the lower courts argued that this claim of underperformance alone was not enough. To prove a fiduciary breach, the employee would need to compare the actual returns to something: a meaningful benchmark, such as a similar fund with publicly known performance or an industry standard.
This disagreement is crucial. If the court agrees with the employee, plan sponsors face huge litigation risk, because almost any alternative investment could be attacked as underperforming. If the court sides with Intel, underperformance becomes legally meaningless without a proper comparison point.
During the arguments, justices across the ideological spectrum latched onto a fruit metaphor. Justice Clarence Thomas summed it up: “You can’t compare apples and oranges. If you have a fund designed to produce high returns but riskier returns, you can’t compare that to a fund that is to protect against losses.” Justice Elena Kagan added that you need “another apple.” Justice Neil Gorsuch pressed the employee’s attorney to agree that “a meaningful benchmark of some kind is required, apples, not oranges.”
The repeated metaphor signals the justices believe comparing investments of different risk profiles without a benchmark is nonsensical. Legal experts who watched the arguments said the questioning pattern strongly suggested the Court will rule for Intel.
Employers are caught between court and regulation
The stakes for business are concrete. Plan sponsors want to offer 401(k) private funds because they can deliver higher returns over time, diversify from stocks and bonds, and appeal to younger employees seeking broader investment choice. But adding them creates legal exposure.
Right now, employers face a two-front uncertainty. They are waiting for the Supreme Court’s decision on what constitutes a valid underperformance claim. Simultaneously, they are watching the Labor Department draft rules on how plan sponsors should evaluate and select alternative investments.
The Biden administration issued a warning in December 2021 that most plan fiduciaries lack the expertise to manage 401(k) private funds safely, citing their complexity and high risk. This created a chilling effect. The Trump administration reversed course, issuing an executive order in August 2025 to expand access and proposing Labor Department rules in March 2026 that would provide clear safe-harbour guidance on the process for selecting alternatives. A public comment period closed on 1 June.
Elizabeth Hopkins, a principal at Hopkins ERISA Law and former senior trial attorney with the Labor Department, said employers are in limbo: “I think companies want to know what’s going to happen with the proposal and what’s going to happen with the Supreme Court case before they go rushing in to change their investment strategies.”
Will a ruling for Intel actually push employers to act?
Even a Supreme Court victory for Intel and clear Labor Department rules may not unlock the market as quickly as asset managers hope. Kent Mason, a partner at Davis & Harman who represents major employers and large retirement plan vendors, expects large corporations to move slowly. “The largest companies are going to be the slowest to do this,” he said, predicting that smaller and mid-size companies will add 401(k) private funds first.
His reasoning is litigation risk arithmetic. Even with a Supreme Court ruling and safe-harbour rules, the Labor Department’s guidance includes a six-factor subjective analysis for investment selection. Plaintiffs’ lawyers can still argue that a large company failed to apply that analysis thoroughly. Smaller employers face less litigation exposure simply because they manage fewer participants and attract fewer class-action lawyers.
Alternative investments are already common in defined benefit pensions, where employers bear the investment risk. In 401(k)s, employees bear it. That psychological and legal difference has made employers far more cautious about adding alternatives to individual retirement accounts, even though ERISA (the Employee Retirement Income Security Act of 1974) places no prohibition on them.
What the landscape looks like for your 401(k)
If you have a 401(k) through a large employer, 401(k) private funds are unlikely to appear in your investment menu in the next year or two, regardless of the Supreme Court outcome. The legal and reputational risk is simply too high for Fortune 500 companies to move fast.
If you work at a smaller or mid-sized company, your plan sponsor may begin exploring 401(k) private funds once the Supreme Court rules and the Labor Department finalises its rules. Before that happens, your company is probably waiting.
The broader consequence is that 401(k) investors will continue to have fewer investment options than the asset management industry and the Trump administration believe they should. That may change gradually, as litigation risk fades and more products are built, but the shift will be slower than either the Court ruling or the new rules alone might suggest.
For deeper guidance on 401(k) investment options and how to evaluate your plan’s menu, read our guides to 401(k) performance benchmarking and fiduciary standards in retirement plans.
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Originally reported by CNBC. Facts verified; analysis and wording are Thewealthora’s own.
Ethan Caldwell
Executive Editor, Markets
Ethan Caldwell is Executive Editor of Thewealthora's Finance Wire, the desk that carries this site's fast coverage of US equities, corporate earnings, central bank decisions and the macro calendar.
