A recent decision by the U.S. Supreme Court (SCOTUS) has resolved the long-standing issue of what constitutes actual knowledge under The Employee Retirement Income Security Act (ERISA).
When drafting ERISA in the early 1970s, Congress established that the statute of limitations for reporting breaches of fiduciary duty would differ depending on whether a plaintiff has actual knowledge of the violation. One example of a breach of fiduciary duty is mishandling funds. A plaintiff who does not have actual knowledge of a breach must file suit within six years of “the date of the last action which constituted a part of the breach or violation.” When a plaintiff has actual knowledge of a breach of the fiduciary duty, the statute of limitations is only three years. Over time, defendants have made the argument that the three-year statute of limitations is triggered merely by providing the required disclosure documentation to plan participants, regardless of whether plan participants actually read them.
The Supreme Court of the United States disagreed with the Defendant’s position in its recent decision, Intel Corp. Investment Policy Committee, et al. v. Sulyma, 589 U.S. ___ (2020), and ruled that “to have actual knowledge of a piece of information, one must, in fact, be aware of it.” SCOTUS used the other sections of ERISA, where Congress indicated that a plaintiff’s constructive knowledge (a plaintiff should have known) is sufficient. For example, “ERISA requires plaintiffs challenging the suspension of benefits under §1085 to do so within one year after the earliest date on which the plaintiff acquired or should have acquired actual knowledge of the existence of such cause of action. . . . When Congress has included both forms of knowledge in a provision limiting ERISA actions, it has done so explicitly.”
While it is unclear how a plan administrator can ensure that participants read or gain “actual knowledge” of plan documents and details, SCOTUS has included some guidance. Specifically, plaintiffs will be bound by oath in their depositions to admit if they have read particular disclosures; actual knowledge can be proved through inference from circumstantial evidence, and defendants are not precluded from asserting that evidence of willful blindness supports a finding of actual knowledge.
Due to this development, we encourage you to review the organization’s ERISA procedures with the plan administrator to determine what, if any, changes should be made to how these disclosures are distributed to plan participant.