USA – DISTRICT OF COLUMBIA Trends and Developments Contributed by: Sanford Heisler Sharp McKnight, Sanford Heisler Sharp McKnight
performance. Poorly chosen benchmarks can obscure underperformance or exaggerate success. The DOL’s proposal comes just as the Supreme Court gears up to weigh in on the much-debated “mean - ingful benchmark” standard in Anderson v Intel Corp Investment Policy Committee . In Anderson , the Ninth Circuit held that to plead fidu - ciary imprudence “based on a fiduciary’s decision to make one investment rather than an alternative” plaintiffs must provide a “sound basis for comparison” – ie, a “meaningful benchmark”. See Anderson , 137 F4th 1015, 1022 (9th Cir 2025), cert granted, 223 L Ed 2d 553 (16 January 2026). The Ninth Circuit went on to explain that meaningful benchmarks are those that have similar aims, risks and potential rewards. Id 1023. This is consistent with DOL guidance that requires fiduciaries to “tak[e] into consideration the risk of loss and the opportunity for gain... compared to the opportunity for gain... associated with reasonably available alternatives with similar risks”. See 29 CFR Section 2550.404a-1 (b)(2)(i). The Supreme Court will now take up the case to deter - mine whether pleading a “meaningful benchmark” is required in fiduciary prudence claims. See Anderson , Petition for Writ of Cert , Anderson , 2025 WL 2993964, at *i (US 20 October 2025) (No 25-498). Regardless of the outcome in Anderson , one thing is clear. Plan fiduciaries can no longer treat benchmark - ing as a routine reporting exercise. Benchmarking must be treated with the same rigour and scrutiny as any other central component of fiduciary prudence analysis. Accordingly, fiduciaries should expect to thoroughly evaluate benchmarks and document their rationale for selecting appropriate investment bench - marks. Complexity “The fiduciary must appropriately consider the desig - nated investment alternative’s complexity and deter - mine that she has the skills, knowledge, experience, and capacity to comprehend the designated invest - ment alternative sufficiently to discharge her obliga - tions under ERISA and the governing plan documents or whether she must seek assistance from a qualified
investment advice fiduciary, investment manager, or other individual in evaluating the designated invest - ment alternative.” The final factor – complexity – arguably underlies every part of a prudent fiduciary process. Many alternative investment products pursue highly complex invest - ment programmes. Terms such as “long/short”, “mar - ket neutral”, “risk arbitrage” and “leveraged portfolio” become part of the lexicon. Fiduciaries are expected to evaluate plan investments with the same skill and expertise that industry profes - sionals “familiar with such matters” would use when overseeing “an enterprise of a like character and with like aims”. See 29 USC Section 1104 (a)(1)(B). For many retirement plans, this means the skill and exper - tise expected of an investment professional tasked with overseeing several billion dollars in assets under management. With alternative investments pushing to gain access to retirement plan dollars, scrutiny of fiduciary knowledge and expertise becomes even more critical. The DOL aptly recognises that some investments may exceed the practical competence of typical plan fiduciaries, especially where fiduciary committees are comprised of internal employees whose primary responsibilities are unrelated to sophisticated investment analysis. The proposal’s managed account example is particu - larly instructive. The DOL concludes that fiduciaries act imprudently when they fail to understand how a complex service operates and therefore cannot pro - vide the information necessary for participants to receive its intended benefits. However, the foregoing principle extends well beyond managed accounts. Plan fiduciaries cannot rely on superficial familiarity with investment terminology. Under the DOL’s proposal, fiduciaries must under - stand the mechanics of analysing: • investment objectives and how the manager intends to pursue them; • whether the fund concentrates its investments in a particular asset; • how much leverage the fund intends to use;
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