Big headlines in retirement plan litigation don\u2019t just hit household names; they\u2019re a reminder that fiduciary duty doesn\u2019t come with automatic immunity for size or reputation. Last week, a $70 million ERISA class action lawsuit was filed against the Bloomberg L.P. 401(k) Plan on behalf of more than 20,000 current and former participants.<\/p>\n
According to the complaint, plan fiduciaries allegedly failed to act prudently by retaining two investment options that underperformed their benchmarks for over a decade. Specifically, the Harbor Capital Appreciation Fund and the Parnassus Core Equity Fund stayed on the plan menu despite long-term lagging performance compared with relevant indices and peer groups. Plaintiffs say that this failure to remove imprudent investment options cost participants tens of millions of dollars in retirement savings.<\/p>\n
This isn\u2019t an isolated phenomenon. ERISA litigation against 401(k) plans has continued to increase, with plaintiffs\u2019 firms seeking to hold fiduciaries accountable for underperforming funds, excessive fees, and poor governance generally.<\/p>\n
For plan sponsors and fiduciaries, the Bloomberg case highlights several key points:<\/p>\n
\u00b7 Performance alone isn\u2019t enough \u2014 it\u2019s the process you follow when evaluating and removing options that matters in an ERISA challenge.<\/p>\n
\u00b7 Documentation is defense \u2014 recordkeeping of investment reviews, benchmarks, and committee deliberations isn\u2019t optional; it\u2019s a core part of prudence.<\/p>\n
\u00b7 Long-term lag isn\u2019t academic \u2014 persistent underperformance relative to objective comparators can be used as evidence of imprudence.<\/p>\n
At the end of the day, most sponsors don\u2019t want litigation. But they do want to protect participants and their own organization. A disciplined, documented investment monitoring process isn\u2019t just best practice \u2014 in today\u2019s environment, it may be your best defense.<\/p>\n
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