Target date fund lawsuits based on performance continue to rock the retirement plan industry. Microsoft is the latest to be named in a suit involving BlackRock TDFs in the tech giant’s 401k. The lawsuit comes on the heels of similar cases filed against Capital One, Citigroup, and others involving similar circumstances.
“Miller Shah LLP. is taking the lead on many cases and recently filed similar suits involving Fidelity Investments’ target-date funds.”
“The proposed class action accuses Microsoft of mismanaging its $38 billion 401k plan by selecting target date funds from BlackRock—which isn’t named as a defendant—as the plan’s default investment option,” Bloomberg Law reports. “These funds significantly underperformed similar funds from competitors and caused plan participants to lose out on millions of dollars in retirement savings, according to the lawsuit.”
The law firm of Miller Shah LLP. is taking the lead on many of the cases and recently filed similar suits involving Boston-based Fidelity Investments’ target-date funds.
The companies in the BlackRock-focused cases “are accused of improperly favoring these funds from BlackRock …because of their low price tag and without properly considering their poor performance,” the news service adds. “The defendant companies ‘appear to have chased the low fees charged by the BlackRock TDFs without any consideration of their ability to generate return,’” according to the complaints.
While cases targeting retirement plans traditionally focused on fiduciary breaches under ERISA involving high fees and improper share classes, plaintiffs now allege low fees at the expense of performance. This twist has many industry watchers alarmed at the potential precedent.
Fees charged for retirement plan services continue to attract attention. Revenue sharing and other once-common practices have fallen from favor with greater consumer awareness and education in light of fewer pensions available to workers.
Famed fiduciary tort lawyer Jerry Schlichter with St. Louis-based Schlichter Bogard and Denton pioneered ERISA-based claims, arguing one case, Tibble V. Edison, before the Supreme Court.
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