Motion to Dismiss Should be Granted in BlackRock Lifepath Target Date Cases

Recently, class action lawsuits were filed against 11 plan sponsors that offer the BlackRock Lifepath Index Target Date Funds. These cases differ from ERISA lawsuits that focused exclusively on excessive fees. The allegations challenge the outcome of a plan sponsor’s decision rather than the process used to arrive at their decision which is concerning. The plaintiffs claim that the plan sponsors focused only on the lowest cost and did not consider the potential outcomes of other target date funds.

Courts have not generally reviewed the outcomes of fiduciary decisions but rather the process followed when the decision was made. With the benefit of hindsight, plaintiffs can scour the universe of available investments to identify alternatives that provide a greater return. In the Blackrock cases, the investments the plaintiffs use to compare performance have fundamental differences in investment strategies that may account for differences in investment returns.

One defendant, Booz Allen Hamilton, Inc., has filed a motion to dismiss based on the following:

  1. The target date funds being used to compare returns are not appropriate benchmarks
  2. An allegation of underperformance on its own does not support a claim of imprudence
  3. Publicly available market ratings support the quality of the Lifepath Funds
  4. The Lifepath funds outperformed the comparator funds during some time periods and, therefore could not be imprudent.

The motion argues that if the case is allowed to proceed, it would open the floodgates to litigation for virtually all plans, arguing that “any enterprising plaintiff’s attorney can find an “imprudent” investment in virtually every plan.”

It is time for the judiciary to acknowledge that suits challenging the outcomes of a fiduciary’s decisions are a bridge too far. The motion to dismiss should be granted to limit these ERISA lawsuits that the plaintiff’s counsel is using to target retirement plans and their fiduciaries in hopes of obtaining large settlements.

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