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Shah Miller Targets (Yet) Another 401(k) with BlackRock TDF


Yet another large 401(k) plan has been sued for its decision to have the BlackRock LifePath target-date funds on its menu. 

This time it’s the $1.5 billion Advance 401(k) Plan, in a suit filed by former participant and current plaintiff Jermaine Anderson (on behalf of himself and some 12,027 participants). Anderson had, according to the suit, had his account invested in the BlackRock LifePath Index 2035 Fund. 

Here, as in the rest of this class of litigation (and in identical language), the suit (Anderson v. Advance Publ’ns, Inc., S.D.N.Y., No. 1:22-cv-06826, complaint 8/10/22) alleges that “the BlackRock TDFs are significantly worse performing than many of the mutual fund alternatives offered by TDF providers and, throughout the Class Period, could not have supported an expectation by prudent fiduciaries that their retention in the Plan was justifiable.”

“Instead, as is currently in vogue,” the suit continues, “Defendants appear to have chased the low fees charged by the BlackRock TDFs without any consideration of their ability to generate return. Had Defendants carried out their responsibilities in a single-minded manner with an eye focused solely on the interests of the participants, they would have come to this conclusion and acted upon it. However, Defendants failed to act in the sole interest of Plan participants and breached their fiduciary duties by imprudently selecting, retaining, and failing to appropriately monitor the clearly inferior BlackRock TDFs.”

Again, as in the other suits,[i] this one holds out for specific (additional) criticism the positioning of those funds as the qualified default investment alternative—which, the suit alleges, has resulted in roughly three-fourths of the assets of the plan being invested in them. And, as in the other such suits, this one claims that the custom benchmark chosen for these funds was inappropriate, suggesting instead that better “comparator” funds would be other target-date funds, despite their glidepath positioning as being “through” TDFs, rather than ones managed “to” a retirement date, as the BlackRock funds are. 

And, like the rest of the suits,[ii] this one alleges: “…the Plan’s investment in the BlackRock TDFs has resulted in participants missing out on millions of dollars in retirement savings growth that could have been achieved through an investment in any of the below alternative TDFs, and indeed many other options.”

Stay tuned. This may not be the end of these…

NOTEIn litigation there are always (at least) two sides to every story. However factual it may turn out to be, the initial lawsuit in any action is only one side, and one generally crafted toward a particular result. In our coverage you'll see descriptions of events qualified with statements such as “the suit says,” or “the plaintiffs allege” and qualifiers should serve as a reminder of that reality.    

[i] All represented by Miller Shah LLP – which include Genworth Financial Inc., MicrosoftCisco Systems Inc., Booz Allen Hamilton Inc., Stanley Black & Decker Inc., Wintrust Financial Corp., and Marsh & McLennan Cos.

[ii] Here, as in the other suits, the Fidelity Freedom funds a target of the plaintiffs’ counsel in separate actions is set aside as “an imprudent selection for the Plan for the duration of the Class Period due to myriad quantitative and qualitative red flags after undergoing a strategy overhaul in 2014.” However, they go further in a footnote, claiming that “…even the anemic and imprudent Freedom Funds outperformed the BlackRock TDFs during the Class Period. While the Freedom Funds were not a suitable alternative for the Plan, a fiduciary applying the requisite scrutiny to the BlackRock TDFs would have been aware of their underperformance compared to the Freedom Funds, despite the issues plaguing the Freedom Funds. This is even further confirmation of the inability of the BlackRock TDFs to provide competitive returns throughout the Class Period.” Bearing in mind, of course, that Shah Miller has also, in other actions, targeted the Fidelity Freedom funds though not necessarily successfully.