Alternative Investments in Retirement Plans – Part III

Originally published 09/24/2025

Sponsors and Fiduciaries successfully argued (in the Intel Cases) that including alternatives among the account owner’s investment choices is not automatically a breach of fiduciary duty if managed with care and diligence. Intel’s policy committee demonstrated that they followed a comprehensive, well-documented, and prudent decision-making process under ERISA standards.

The Courts agreed with them, finding no breach of fiduciary duties.

The decision exalts process above outcomes. The “Intel case” and the “So What” defense define procedural steps that Sponsors and Fiduciaries can follow to reduce their exposure to liability and lawsuits. To gain that relief fiduciaries follow an extensive, documented process that demonstrates prudence.

1. Conduct and document a thorough due diligence process

ERISA's duty of prudence evaluates the decision-making process, not investment performance after the fact. To meet this standard, plan sponsors: 

• Evaluate potential investments. Assess fees, risks, liquidity constraints, historical performance, and the investment manager’s track record.

• Use appropriate benchmarks. Ensure that benchmarks are truly comparable and have similar aims, risks, and potential rewards.

• Document everything. Keep meticulous records of the rationale for selecting or retaining an alternative asset, expert advice received, and ongoing monitoring activities. 

2. Implement a careful plan design

Plan sponsors mitigate risk by carefully structuring how alternative assets are offered to participants.

• Offer alternatives within managed funds. Include alternative assets as a component of a professionally managed, diversified investment option, such as a target-date fund or collective investment trust (CIT) to limit participants' exposure.

• Limit allocations. If participants can invest directly in alternative assets, limit the percentage of a participant's account that can be allocated to these investments.

• Offer through a brokerage window. Making alternatives available through a self-directed brokerage account shifts some investment responsibility to the participant, but even in this scenario, fiduciaries must still ensure the options offered are prudent. 

3. Ensure robust participant communication and education

The Supreme Court's ruling in Sulyma clarified that simply disclosing information does not establish "actual knowledge" by a participant. Fiduciaries should go beyond basic disclosure to ensure participants are properly informed. 

• Provide clear, comprehensive information. Communicate the nature, risks, fees, and liquidity limitations of alternative investments in a way that is accessible and easily understood by the average participant.

• Educate participants on risks. Create materials and communications that explain how alternatives differ from traditional asset classes, including their unique risks and fee structures.

• Tailor materials for different participants. Acknowledge that not all participants have the same level of investment sophistication and adjust educational materials accordingly. 

• Utilize electronic delivery regulations (DOL’s e-delivery safe harbor) and obtain verifiable evidence that disclosures have been not only provided but accessed or acknowledged by participants.

4. Limitations Defense and Statute of Limitations Tracking

Maintain clear time-stamped records showing when disclosures are delivered and (where feasible) when participants demonstrate actual knowledge, to invoke the three-year limitations period under ERISA Section 413(2).

Retain all documentation for at least six years to protect against the six-year statute in absence of participant “actual knowledge”.

5. Regularly monitor investments

The duty of prudence is ongoing and requires a commitment to continuous oversight.

• Monitor performance and fees. Continuously evaluate the performance, fees, and operational aspects of alternative investments.

• Stay current with regulations. Monitor new developments from the Department of Labor (DOL) and other regulatory bodies, as regulatory guidance on alternative assets can shift.

• Be prepared to make changes. If an investment no longer serves the plan's objectives or if better options emerge, be ready to remove or replace it. 

6. Review and update governance documents

• Review and amend the Investment Policy Statement (IPS). Update the IPS to explicitly address the evaluation and monitoring of alternative assets.

• Update related documents. Review committee charters or plan documents to ensure consistency with any new changes regarding alternative investments.

• Consult with experts. Work with investment consultants and ERISA counsel to assess compliance and revise governance practices. 

Cambyses Financial Advisors  offers Portfolio, Asset, and Wealth Management and Planning services, for Businesses, their Retirement Plans, and their Owner’s Succession and Retirement. For more information, contact us at : +1 (818) 489-4228 or steven@cambysesadvisors.com

The Article is not an endorsement of any product or producer we mention. It is not an offer to buy or sell any security. Investments in sector companies may be risky and speculative. Consult your financial advisor for additional information. 

The information in this article has been included in good faith for general information purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our articles.