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Federal Judge Dismisses Two of the BlackRock TDF Suits


Two of the suits challenging the prudence of plans holding the BlackRock Lifepath target-date funds were dismissed yesterday.

The suits—one involving Capital One Financial Corp., the other involving Booz Allen Hamilton[i]—were both dismissed by U.S. District Judge Michael S. Nachmanoff following oral arguments, reportedly rejecting the arguments that the BlackRock funds could be compared with the so-called “comparator” funds without considering different strategies, glidepaths and investments. 

That said, he allowed the plaintiffs 14 days to file an amended complaint.

In addition to the suits noted above, the suits have been filed on behalf of participants in in the 401(k) plans of Citigroup Inc., Cisco Systems Inc., Genworth, Stanley Black & Decker Inc., Microsoft, Marsh & McLennan Cos., Advance Publications, and Wintrust Financial Corp.—all holders of the BlackRock[i] LifePath Index Funds. Representing the plaintiffs in each of these suits is the law firm of Miller Shah LLP—which has also targeted the Fidelity Freedom funds in a series of suits (albeit on different grounds). 

The basic argument is that the plan fiduciaries “chased low fees,” and in the process myopically ignored the poor performance of the BlackRock Lifepath TDFs, at least compared to the target-date funds that the plaintiffs argued were a valid benchmark—the half-dozen leading target-date fund families, though those funds all employed a “through” retirement date glidepath, unlike the BlackRock funds that have opted for a “to” retirement date glidepath.

Stay tuned.


[i] The American Retirement Association has joined with the American Benefits Council and the ERISA Industry Committee in filing an amicus brief in support of the plan defendants in several of these cases, including the Booz Allen Hamilton case.