ERISA class action lawsuits, alleging that plans have charged excessive fees or provided poorly performing investment selections in retirement plans, have continued in recent months. The U.S. Supreme Court’s January 2022 ruling in Hughes v. Northwestern University has not stopped the deluge of these filings, even as summer rulings in the Sixth Circuit have potentially narrowed the pleading standards for these types of lawsuits. See Smith v. Commonspirit Health and Forman et al. v. TriHealth, Inc.
Former Microsoft Workers Challenge BlackRock Fund in ERISA Suit
Ex-Microsoft workers have filed an ERISA suit against Microsoft, its board of trustees, its 401(k)-plan committee, and other executives for breach of fiduciary duty. The workers claim that Microsoft mismanaged the company retirement plan, which has more than 15,000 participants, by selecting and retaining BlackRock LifePath Index Funds in the company retirement plan.
Asset manager BlackRock handles target-date funds (TDFs), an investment strategy where risk shifts over time, depending on how close an individual is to retirement. Plan participants complain that BlackRock underperformed as opposed to other viable mutual fund investment options. As a result, the workers claim that Microsoft should have removed the fund as an investment option in favor of a better and more consistently performing fund. The participants also alleged that Microsoft compounded their breach of fiduciary duty by selecting BlackRock as the default investment option when participants failed to choose where their options should be invested. The case is Beldock et al. v. Microsoft Corporation et al., case number 2:22-cv-01082, U.S. District Court for the Western District of Washington.
Citigroup Faces TDF ERISA Dispute
Ex-Citigroup employees have filed another proposed class action targeting BlackRock TDF, which the company offers as an option in its defined contribution retirement plan that serves more than 109,000 participants. In Motz et al. v. Citigroup Inc. et al., case number 3:22-cv-00965, U.S. District Court for the District of Connecticut, the plaintiffs alleged that Citigroup, its board of trustees, its retirement plan administrative committee, and selected executives violated their fiduciary duties under ERISA. In addition, they claim that Citigroup used an irrational decision-making process to include TDF in the investment lineup and to select it as the default option when participants failed to direct their investments elsewhere.
Cisco Also Faces BlackRock Litigation Woes
In Bracalente et al. v. Cisco Systems Inc. et al., case number 5:22-cv-04417, U.S. District Court for the Northern District of California, a proposed class of retirees from Cisco Systems, Inc., also alleges mismanagement of their 401(k) plan by including BlackRock TDF as an option. As in the Citigroup and Microsoft class action suits, the Cisco suit involves claims that failing to replace BlackRock with a suitable alternative TDF investment cost participants significant losses.
Some benefits attorneys and insurance companies have been suspicious of the sudden proliferation of BlackRock suits, which appear to make the same boilerplate claims. Previous suits claiming mismanagement of 401(k) funds attacked employers for retaining funds with high performance but excessive fees. Suits now are trending toward criticizing funds with lower fees but less impressive performance.
Unique TDF Claim Plagues Holding Company
Participants in Marmon Holdings, Inc.’s 401(k) plan are challenging the inclusion of an underperforming TDF that the company itself created and offered. In Lard et al. v. Marmon Holdings, Inc. et al., case number 1:22-cv-04332, U.S. District Court for the Northern District of Illinois, participants alleged that Marmon breached its fiduciary duty in offering its own TDF in favor of other reputable TDF available on the market. They charge that including its proprietary, TDF, led to millions in losses for plan participants. The Marmon plan reported more than $1.1 billion in plan assets at the end of 2020.
Dover Corp Hit with Excessive Fees ERISA Suit
Retired employees have filed a proposed class action lawsuit against Dover Corp, an industrial products company, for breach of fiduciary duty by allowing excessive recordkeeping and account management fees. The retirees also allege that the company failed to remove certain recordkeepers and financial providers from the plan that charged excessive fees. Dover’s plan had close to $1.6 billion in assets and more than 18,000 participants at the end of 2020. The case is Gosse v. Dover Corporation et al., case number 1:22-cv-04254, U.S. District Court for the Northern District of Illinois.
Retirees File ERISA 401(k) Mismanagement Suit Against Swiss Re
Ex-workers for the American branch of insurance company, Swiss Re, filed a proposed class action lawsuit in New York alleging mismanagement of their employee retirement plan. The plan holds $1.38 billion in assets and serves more than 4,000 participants. The proposed class claims that Swiss Re American Holding Corp. and its executives breached their fiduciary duty by selecting and retaining poorly performing investments and allowing the plan to be charged excessive recordkeeping fees and administrative costs. The case is Harris et al. v. Swiss Re American Holding Corporation et al., case number 1:22-cv-07059, U.S. District Court for the Southern District of New York.
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