Lawsuit Accuses Fiduciaries of Chasing Low Fees Without Regard to Performance

Microsoft is the latest target in a string of lawsuits over the performance of a popular TDF suite.

Microsoft Corporation is the target of a new complaint in a series of lawsuits claiming that the BlackRock LifePath Index Funds suite of 10 target-date funds were an imprudent investment choice for defined contribution plans.

The lawsuits accuse the defendants of selecting and retaining “poorly‐performing investments instead of offering more prudent alternative investments that were readily available at the time.” They say the “BlackRock TDFs are significantly worse performing than many of the mutual fund alternatives offered by TDF providers.”

As in the other lawsuits, the complaint against Microsoft alleges that weighing the BlackRock TDF suite against others “would have raised significant concerns for prudent fiduciaries and indicated that the BlackRock TDFs were not a suitable and prudent option for the plan.” The lawsuit says an objectionable evaluation would have led fiduciaries to select a better-performing and more appropriate suite of TDFs.

Perhaps in consideration of the many excessive fee lawsuits filed against retirement plans over the past decade, the plaintiffs say the defendants appear to have chased low fees, which they say is “currently in vogue,” and didn’t consider the BlackRock TDFs’ ability to generate returns.

The string of lawsuits filed by the Miller Shah law firm has garnered criticism from the fiduciary insurance firm Euclid Fiduciary. Daniel Aronowitz, principal of the firm, says the lawsuits are “the most outrageous of all of the excessive fee/investment underperformance cases that have ever been filed.” In a blog post, he wrote, “If Miller Shah is allowed to profit by alleging that plan fiduciaries committed malpractice by selecting the highly rated, low-cost BlackRock target-date funds, then every fiduciary in America is at risk of being accused of malpractice if they serve on a retirement plan. In other words, if the BlackRock target-date funds can be challenged, then every investment selection can be challenged.”

Microsoft has not responded to a request for comment.