I’ve always said, “You’re only one rigorous process away from averting a major fiduciary failure.” It’s one thing to trust your advisors — but completely another to delegate without oversight. So when I saw the article in NAPA – National Association of Plan Advisors titled “Suit Says Plan Sponsor ‘Uncritically Relied’ on Advisor TDF Choice,” I flipped back through the decades of plan-committee meetings I’ve sat in, the ones where we drilled into vendors and funds and saved clients from themselves.
Here’s the gist of the case: In Elanco US, Inc.’s 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’s fiduciaries and the investment adviser of breaching their duties. The complaint claims that the committee “uncritically relied” on the adviser in selecting and retaining a suite of American Century Target Date Funds as the plan’s 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.
Why I View This as a Red-Flag for Plan Sponsors
1. Delegation is not abdication. You can hire a 3(21), have an adviser, outsource many operational tasks—but 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’s vulnerable.
2. Process over performance—but 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 “score under 65 → watch list,” yet the committee didn’t act. That gets to the heart of prudence: it’s not just the tool you used (advisor + fund); it’s how you governed it.
3. The “unreasonable delay” element is emphasized. The complaint alleges the committee “delayed too long” to replace the under-performing TDFs despite knowing of the red flags. In plain Ary-Rosenbaum language: when the gear’s squeaking, you don’t wait for full failure before pulling the lever.
4. The stakes are real: “tens of millions of dollars” lost. The plaintiffs allege the mistakes caused “tens of millions” in losses for participants. Whether or not that number holds up, the message is clear: poor oversight = potential multi‐million liability
What You Should Do Now (Yes, this is the “Ary” checklist)
· Pull your TDF/QDIA suite. Who are the vintages? What are the benchmark returns, peer-group comparisons, turnover, asset-flows? Run a “score <65” type analysis (or something equivalent) and document the result.
· 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’ve got exposure.
· 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—or worse, you do nothing—you’re behind.
· Monitor timing and replacement decisions. If you find a fund that’s underperforming, how long until you take action? The court of public opinion (and the plaintiffs’ bar) is increasingly looking at delay as evidence of imprudence.
· Document like your audit depends on it. You’ll want minutes that reflect “we reviewed performance, asked these questions, concluded to stay because of X, Y, Z” OR “we reviewed and concluded to replace effective date Z.” When the next complaint hits, you’ll need that trail.
Final Word to the Fiduciary Tribe
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’re not just reviewing pie charts and fee schedules—you’re managing a promise to your employees. That promise says: “We will give you a retirement vehicle, guided by prudence, to build tomorrow.” When you say to yourself, “But the adviser told us it’s okay”, ask this question: Did you challenge the adviser? Because the lawsuit says: sitting quietly = “uncritically relying.”
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—you hear the squeak long before the damage sets in.
