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Milliman’s TRF Choice Challenged


Another fiduciary breach suit has been filed involving a series of target funds with a short, and allegedly poor, track record.

This time it’s participant-plaintiff Joanna P. Mattson bringing suit “individually and on behalf of the Milliman, Inc. Profit Sharing and Retirement Plan and a class of participants and beneficiaries of the Plan affected by the challenged conduct of the Milliman Defendants.[i]

At issue here—as has been the case in some unrelated litigation of late[ii]—are some allocation funds, more specifically a suite of target risk funds (the Unified Trust Wealth Preservation Strategy Target Growth Fund, Unified Trust Wealth Preservation Strategy Target Moderate Fund and Unified Trust Wealth Preservation Strategy Target Conservative Fund. 

The funds were put in the plan menu in 2013, but the suit comments that “having only been launched in November 2012, the Unified Funds were brand new, had no investment track record, and were untested.” Indeed, the suit goes on to note that, “by the end of 2013, the Plan was the sole investor in the Moderate and Conservative Funds and represented about 97% of the assets of the Aggressive Fund,” citing Department of Labor filings.

The suit (Mattson v. Milliman, Inc., W.D. Wash., No. 2:22-cv-00037, complaint 1/13/22) alleges that during the nine years since their introduction to the $1.7 billion plan in 2013, the Unified Funds “significantly underperformed meaningful benchmarks, which include both benchmark indexes (including the index preferred by the Unified Funds’ investment manager itself) and comparable target risk funds.”

‘Not the Whole Story’

“But mere underperformance is not the whole story,” the suit continues, going on to state that “the depth and breadth of the underperformance is as jarring as it is incomprehensible.” The suit claims that, since Jan. 1, 2013, the Aggressive Fund’s investment return underperformed a key investment benchmark by a cumulative total of over 62%; that—according to Morningstar—it ranks in the bottom 90th percentile among the funds in its peer universe; and that “despite this abysmal record of significant underperformance year-after-year, and a marketplace teeming with hundreds of better performing investment options, the Milliman Defendants did not remove any of the Unified Funds from the Plan.”

The suit—filed on behalf of the plaintiff by Sanford Heisler Sharp LLP and Byrnes Keller Cromwell LLP—goes on to claim that over the last five-year period, “the three Unified Funds have performed worse than 70% to 90% of funds within their recognized peer universe, according to Morningstar.” 

The suit claims that the failure to remove the Aggressive Fund has cost participants approximately $46 million, $28.8 million from a failure to remove the Moderate Fund, and $10.6 million from a failure to remove the Conservative[iii] Fund, at least compared to the performance of the best performing fund in the group. All of which (apparently) leads them to request as relief to restore “$85 million in losses.”

Stating that “no prudent investor would have sat idly by in the face of such underperformance,” the plaintiff claims that “this failure to act has had devastating consequences for participants’ retirement accounts.” 

Moreover, “with $1.7 billion in assets, the Plan has tremendous leverage to demand and receive superior investment products and services. But the Milliman Defendants did not use their leverage to identify and select prudent target risk options for Plan participants. Instead, the Milliman Defendants opted for poorly performing options for which they serve as sub-adviser,” the suit says.

The Allegations

The Defendants breached their duties of prudence and loyalty with respect to the Plan by at least the following actions or omissions:

  1. failing to properly investigate the availability of, and give appropriate consideration to, funds with comparable or superior performance as alternatives to the Unified Funds;
  2. failing to evaluate and monitor on a regular basis the performance of the Unified Funds and the adverse impact of the long-term and significant underperformance of the Unified Funds on participants’ retirement savings;
  3. failing to implement and employ an ongoing process to monitor the investment performance of the Unified Funds;
  4. considering and being motivated in whole or in part by Milliman Financial Risk Management LLC’s continuing role as sub-adviser for the Unified Funds’ $250 million in assets; and
  5. failing to promptly remove the imprudent Unified Funds.

Monitoring Missteps?

And allegedly breaching their fiduciary monitoring duties by, among other things:

  1. failing to monitor their appointees, to evaluate their performance, or to have a system in place for doing so, and standing idly by as the Plan suffered enormous losses as a result of their appointees’ imprudent actions and omissions with respect to the Plan;
  2. failing to monitor their appointees’ fiduciary process, which would have alerted any prudent fiduciary to the potential breach because of the imprudent investment options in violation of ERISA;
  3. failing to ensure that the monitored fiduciaries had a prudent process in place for evaluating and ensuring that the Unified Funds were prudent; and
  4. failing to remove appointees whose performance was inadequate in that they continued to allow imprudent investment options to remain in the Plan to the detriment of Plan participants’ retirement savings.

Will those allegations move this beyond the anticipated motion to dismiss? Stay tuned.


[i] More specifically, Milliman, Inc., the Board of Directors of Milliman, Inc. and its members, the committee that selects investment options for the Plan (the “Investment Committee”) and itsmembers, and the committee that administers the Plan (the “Administrative Committee”) and its members.

[ii] Similar charges relating to asset allocation funds with relatively short performance histories have recently been filed against Northern Trust’s Focus funds. See “Focus Funds Draw (More) Fire.”

[iii] The suit actually mislabels this last one as belonging to the Moderate Fund, though its positioning clearly is intended for the Conservative Fund option.