Litigators Share What They Investigate for Filing TDF Lawsuits

Litigators Share What They Investigate for Filing TDF Lawsuits

A litigation firm has listed what it is investigating for potential lawsuits over target-date funds (TDFs) in retirement plans, and an ERISA attorney make suggestions for how plan fiduciaries may avoid such suits.

By Rebecca Moore

There’s been a recent wave of lawsuits over the target-date funds (TDFs) being offered in 401(k) plans recently.

A settlement in a lawsuit accusing Franklin Templeton of self-dealing in its 401(k) plan requires it to add a nonproprietary TDF option to the investment lineup in addition to the plan’s qualified default investment alternative (QDIA)—the LifeSmart Target Date Funds. More recently, a lawsuit was filed alleging fiduciaries of the Walgreen Profit-Sharing Retirement Plan selected and kept TDFs in the plan that underperformed their benchmarks. And, last week, retirement plan fiduciaries at Intel were accused of failing to properly monitor and evaluate “unconventional, high-risk allocation models” adopted within the company’s custom target-date funds.

On its website, litigation firm Cohen Milstein says it is investigating a number of issues concerning the selection and offering of TDFs. The firm shares what it is looking for:

Improper Investment Strategy: The firm says, “The actual investment strategy (e.g. the allocation between equities and bonds) may not be same as the fund advertised.  The fund may be pursuing a far riskier investment strategy than participants and plan sponsors are led to believe, even as plan participants near retirement.”

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