I\u2019ve always said, \u201cYou\u2019re only one rigorous process away from averting a major fiduciary failure.\u201d It\u2019s one thing to trust your advisors \u2014 but completely another to delegate without oversight. So when I saw the article in NAPA \u2013 National Association of Plan Advisors titled \u201cSuit Says Plan Sponsor \u2018Uncritically Relied\u2019 on Advisor TDF Choice,\u201d I flipped back through the decades of plan-committee meetings I\u2019ve sat in, the ones where we drilled into vendors and funds and saved clients from themselves.<\/p>\n
Here\u2019s the gist of the case: In Elanco US, Inc.\u2019s 401(k) plan (case caption: Phillips v. Elanco US, Inc., filed Oct. 21, 2025 in the U.S. District Court for the Southern District of Indiana), participant-plaintiffs accuse the plan\u2019s fiduciaries and the investment adviser of breaching their duties. The complaint claims that the committee \u201cuncritically relied\u201d on the adviser in selecting and retaining a suite of American Century Target Date Funds as the plan\u2019s Qualified Default Investment Alternative (QDIA) and core target-date funds, despite persistent underperformance, high turnover, shrinking market share and a clear plan policy that required under-performing funds (score < 65) to be flagged for review.<\/p>\n
Why I View This as a Red-Flag for Plan Sponsors<\/p>\n
1. Delegation is not abdication. You can hire a 3(21), have an adviser, outsource many operational tasks\u2014but you remain the fiduciary for selection, monitoring, replacement. This complaint says the committee let the adviser do the heavy lifting and then sat back. That\u2019s vulnerable.<\/p>\n
2. Process over performance\u2014but performance still matters. Under ERISA, a proper process may keep you safe even if the fund underperforms. Here, the suit alleges the plan policy said \u201cscore under 65 \u2192 watch list,\u201d yet the committee didn\u2019t act. That gets to the heart of prudence: it\u2019s not just the tool you used (advisor + fund); it\u2019s how you governed it.<\/p>\n
3. The \u201cunreasonable delay\u201d element is emphasized. The complaint alleges the committee \u201cdelayed too long\u201d to replace the under-performing TDFs despite knowing of the red flags. In plain Ary-Rosenbaum language: when the gear\u2019s squeaking, you don\u2019t wait for full failure before pulling the lever.<\/p>\n
4. The stakes are real: \u201ctens of millions of dollars\u201d lost. The plaintiffs allege the mistakes caused \u201ctens of millions\u201d in losses for participants. Whether or not that number holds up, the message is clear: poor oversight = potential multi\u2010million liability<\/p>\n
What You Should Do Now (Yes, this is the \u201cAry\u201d checklist)<\/p>\n
\u00b7 Pull your TDF\/QDIA suite. Who are the vintages? What are the benchmark returns, peer-group comparisons, turnover, asset-flows? Run a \u201cscore <65\u201d type analysis (or something equivalent) and document the result.<\/p>\n
\u00b7 Check your advisor-committee relationship. Service agreement, scopes, meeting minutes: Did the adviser provide analysis? Did the committee challenge it, ask tough questions, get benchmarking data? If your documentation is light, you\u2019ve got exposure.<\/p>\n
\u00b7 Review your investment policy statement (IPS). Does it require periodic suitability\/switch reviews? Does it define watch-list triggers? If it says one thing and you do another\u2014or worse, you do nothing\u2014you\u2019re behind.<\/p>\n
\u00b7 Monitor timing and replacement decisions. If you find a fund that\u2019s underperforming, how long until you take action? The court of public opinion (and the plaintiffs\u2019 bar) is increasingly looking at delay as evidence of imprudence.<\/p>\n
\u00b7 Document like your audit depends on it. You\u2019ll want minutes that reflect \u201cwe reviewed performance, asked these questions, concluded to stay because of X, Y, Z\u201d OR \u201cwe reviewed and concluded to replace effective date Z.\u201d When the next complaint hits, you\u2019ll need that trail.<\/p>\n
Final Word to the Fiduciary Tribe<\/p>\n
Let me speak directly to all the plan committee chairs, the HR leaders, the in-house counsel reading this: your plan is notthe place to be passive. You\u2019re not just reviewing pie charts and fee schedules\u2014you\u2019re managing a promise to your employees. That promise says: \u201cWe will give you a retirement vehicle, guided by prudence, to build tomorrow.\u201d When you say to yourself, \u201cBut the adviser told us it\u2019s okay\u201d, ask this question: Did you challenge the adviser? Because the lawsuit says: sitting quietly = \u201cuncritically relying.\u201d<\/p>\n
In the days when my grandfather Emil taught me the value of a well-tightened watch gear, he meant: every piece must mesh. In retirement-plan fiduciary work, your watch is the TDF suite, the adviser, the committee process, the IPS. If one gear is loose\u2014you hear the squeak long before the damage sets in.<\/p>\n
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