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

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The Supreme Court heard a major case this week concerning an Intel retirement plan which could result in a decision that influences employers' appetite for private investments in 401(k)s.
Many plan sponsors are in limbo, awaiting the Supreme Court decision and finalized Labor Department rules covering alternative investments before changing their 401(k) menu, even as the asset management industry is gearing up with new products.
"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," said Elizabeth Hopkins, principal at Hopkins ERISA Law and a former senior trial attorney with the Labor Department, who filed an amicus brief in the Supreme Court case on behalf of former high-ranking DOL officials.
Here's what employers and employees need to know about forces influencing the market for private investments in 401(k) plans.
What Justices Thomas, Alito, Gorsuch and Kagan said
Employers have been whipsawed for the past several years by changing government policies on alternative investments in 401(k) plans and a high-profile lawsuit filed in 2019 by a former Intel employee. That case, Anderson v. Intel Corp. Investment Policy Committee, which the Supreme Court heard oral arguments on Tuesday, Oct. 6, concerns private investments in a defined contribution plan like a 401(k) and the circumstances under which these investments are appropriate.
The case is not challenging whether alternative assets like hedge funds and private equity can be used in a 401(k) plan alongside stocks and bonds. Rather, the question before the court is whether a retirement plan underperformance claim requires alleging a "meaningful benchmark." The heart of the dispute is how to handle claims by employees that plan sponsors have invested their retirement funds imprudently.
Employees contend that the relatively low returns on Intel's plans reflect a breach of fiduciary duty. The lower courts disagreed. Their reasoning: claims of underperformance alone are not enough without showing a "meaningful benchmark" for courts to assess performance.
During the arguments, Supreme Court justices seemed skeptical that plan sponsors' investment choices should provide easy fodder for litigious individuals. Justices frequently turned to a fruit metaphor, with Justice Clarence Thomas summing up his take on the Ninth Circuit's decision as: "you can't compare apples and oranges…if you have a fund…that is designed to produce high returns but riskier returns…you can't compare that to a fund that is to protect against losses."
Several other justices, including from among the liberal side of the court, seemed to agree with his line of reasoning, Ronald Mann, co-director of the Charles Evans Gerber Transactional Studies Center at Columbia Law School, noted in an analysis on SCOTUSblog. Justice Elena Kagan, for instance, commented, "the thing that you need … is another apple."
Justice Samuel Alito challenged the employees' attorney, Matthew Wessler, to clarify whether his position was that one could "state a claim by comparing apples and oranges but supplement that with the suggestion that the strategy was flawed."
Justice Amy Coney Barrett opted for the same metaphor as well.
Meanwhile, Justice Neil Gorsuch asked Wessler to "agree with the general principle that when we're limited to underperformance claims … a meaningful benchmark of some kind is required, apples, not oranges."
Wessler did not respond to a request for comment for this article.
The underlying problem for the court seemed to be the lack of a benchmark. Notably, justices explicitly asked Aimee Brown, assistant to the Solicitor General, how much guidance the court should provide in this case.
Brown's view was that the court should suggest "some parameters" for what a "meaningful benchmark" needs to be. "Prudence is about process and not about performance," she told the justices.
Legal experts say SCOTUS seems likely to side with Intel
Attorneys who attended the arguments in person, listened to the recording or read the transcript took the justices' questions as a sign they were leaning toward siding with Intel and affirming the 9th Circuit. "When the justices are asking opposing counsel to pick and choose among the approaches to use in an opinion, it usually is a safe bet that they are not going to vote for you," Mann wrote.
On rebuttal, Wessler noted that all of the allegations need to be considered together and holistically. "I think that matters in a case like this, where you have an allegation about an imprudent either strategy or implementation of that strategy that then turns out badly," he told the court.
Employers are awaiting the court's ruling, in some cases hoping for guidance that helps temper future litigation. "Private funds can be an effective and entirely appropriate component of 401(k) plan investment options," Eugene Scalia, partner at Gibson Dunn & Crutcher, said in an email. "A ruling for Intel by the court would affirm that and lend further support to the Labor Department rulemaking," said the former U.S. Secretary of Labor who submitted an amicus brief on behalf of The American Investment Council and The Managed Funds Association.
"A positive outcome in this case will go a long way toward getting plan sponsors that have wanted to do this for years, but held off, for fear of being sued, feel more confident that they can do this with less fear of being sued," said Joshua Lichtenstein, partner at Ropes & Gray who heads the firm's ERISA fiduciary practice and was a co-author of an amicus brief to the court on the Investment Company Institute's behalf.
ERISA doesn't prohibit alternative investments
The Employee Retirement Income Security Act of 1974, or ERISA, doesn't discuss alternative investments in 401(k)s, but President Trump pushed for their inclusion during his previous administration. Under his watch, the Labor Department issued an Information Letter in June 2020 designed to "help Americans saving for retirement gain access to alternative investments that often provide strong returns," then-Secretary of Labor Scalia said in a statement.
In December 2021, however, the DOL under the Biden administration issued a supplemental statement, contending that most plan fiduciaries were not suited to evaluate alternative investments, given their complexity and high risk. That had a chilling effect on the market.
The tide shifted, once again, in Trump's second term. In August 2025, he issued a presidential executive order to democratize access to alternative assets for 401(k) investors. Then, in October 2025, Congressman Troy Downing introduced the Retirement Investment Choice Act to codify the executive order into law. And in March, the Labor Department issued a proposed rule that would ease legal and regulatory barriers against adding alternative investments to retirement plans. Comments were due by June 1.
"The proposal is the clearest guidance the department has ever given on the types of information and process that a plan sponsor should go through when making investment decisions," Lichtenstein said.
Big employers may still be slow to add private funds
Most large companies do not offer private investments within their 401(k) plans, even though there's nothing in ERISA saying they can't, said Kent Mason, partner at Davis & Harman, who filed an amicus brief in the Intel case on behalf of the American Benefits Council and represents major employers, large plans and national vendors of retirement plan services.
The latest developments in court and in the regulatory landscape might not change this. "The largest companies are going to be the slowest to do this," Mason said, adding that he expects smaller and mid-size companies to start adding private investments to their 401(k) line-up before large companies, who are subject to more litigation risk.
He expects this even if the Supreme Court sides with Intel and Labor Department rules are adopted. "While the rules provide an excellent and helpful framework, the six-factor analysis is still subjective," he said, referring to recently proposed Labor Department guidance on selecting investment options in plans. "Plaintiffs' attorneys are still likely to file suit alleging large companies failed to meet their safe-harbor fiduciary obligations."
Alternative investments are already common in defined benefit plans, even as 401(k)s have been slower to adopt them. But that's expected to change over time, as investors push for it, more products become available and more companies become comfortable — even if it's slow out of the gate.
"There's a clear business case for making sure plans provide employees with a broad base of investment options," said Harvey Bines, partner at law firm Sullivan & Worcester, whose focus includes investment management law. However, employers will have to take extra care to cover all the legal and fiduciary bases. "The more novel and riskier the options you offer, the more care and oversight you need to incorporate to make and continue the offering," Bines said.
Momentum is rising. During Trump's second term, asset managers and plan providers continue to forge partnerships to offer alternative investments within 401(k)s, with announcements from Empower in May 2025 and Voya Financial in July. OneDigital and Principal Financial Group announced similar partnerships in January and August of this year. In September, Constitution Capital Partners announced the Constitution Capital Horizon CIT, a collective investment trust, that launched with more than $50 million in initial assets across 18 retirement plans and near-term commitments bringing total plan assets to more than $1 billion.
"We're seeing plan sponsors, together with their advisors and consultants, take a closer look at private market investments and begin incorporating them in thoughtful ways," Amy Vaillancourt, president of retirement at Voya Financial, said in an email. She noted that interest isn't just coming from employers. Voya's research found nearly two-thirds of participants want access to private market investments.
"Sponsors want to understand where private markets may benefit their participants' long-term retirement outcomes," Brett Fisher, head of investment product strategy at Principal Financial Group, said in an email. At the same time, they "want to make those decisions in a way that aligns with their fiduciary obligations."

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