How Supreme Court justices are leaning in major 401(k) case over private funds and underperformance

• Multiple justices, including Thomas, Alito, Gorsuch, and Kagan, used an 'apples and oranges' metaphor to suggest different investment types cannot be compared without appropriate benchmarks, signaling likely support for Intel's position
• The case follows years of regulatory whiplash: the Trump administration promoted alternative investments in 2020, Biden's DOL issued cautionary guidance in 2021, and Trump's second term brought new executive orders and proposed rules easing barriers in 2025
• Despite regulatory momentum and new product offerings from Empower, Voya, and Principal Financial Group, large employers are expected to move slowest due to higher litigation risk, while smaller companies may adopt alternative investments first

Supreme Court 401(k) Case Could Shape Alternative Investment Landscape

Key Case Details:

The U.S. Supreme Court heard oral arguments on October 6 in *Anderson v. Intel Corp. Investment Policy Committee*, a 2019 lawsuit challenging whether retirement plan underperformance claims require a "meaningful benchmark." A former Intel employee alleged plan fiduciaries breached their duty by investing in hedge funds and private equity that underperformed.

Legal Status:

Lower courts rejected the claims, ruling underperformance alone is insufficient without a meaningful benchmark for comparison. During arguments, multiple justices—including Thomas, Alito, Gorsuch, Kagan, and Barrett—appeared receptive to Intel's position, using "apples and oranges" metaphors to illustrate that different investment strategies cannot be compared without appropriate benchmarks. Legal experts predict the Court will likely side with Intel.

Regulatory Background:

The Trump administration has pushed to expand alternative investments in 401(k)s through a June 2020 information letter, an August 2025 executive order, and proposed Labor Department rules issued in March (comments due June 1). This reversed the Biden administration's December 2021 guidance that had a "chilling effect" on the market.

Market Implications:

A ruling favoring Intel could encourage more plan sponsors to add alternative investments to 401(k)s, though adoption will likely remain slow among large employers due to litigation concerns. Smaller and mid-size companies may move faster. Asset managers are already positioning for growth—Empower, Voya Financial, Principal Financial Group, and OneDigital announced partnerships in 2025-2026. Constitution Capital Partners launched a collective investment trust with over $50 million in initial assets across 18 plans, with commitments exceeding $1 billion.

Industry Outlook:

Despite regulatory clarity, plan sponsors remain cautious, awaiting both the Supreme Court decision and finalized DOL rules before significantly altering investment menus.