Big headlines in retirement plan litigation don’t just hit household names; they’re a reminder that fiduciary duty doesn’t 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.
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.
This isn’t an isolated phenomenon. ERISA litigation against 401(k) plans has continued to increase, with plaintiffs’ firms seeking to hold fiduciaries accountable for underperforming funds, excessive fees, and poor governance generally.
For plan sponsors and fiduciaries, the Bloomberg case highlights several key points:
· Performance alone isn’t enough — it’s the process you follow when evaluating and removing options that matters in an ERISA challenge.
· Documentation is defense — recordkeeping of investment reviews, benchmarks, and committee deliberations isn’t optional; it’s a core part of prudence.
· Long-term lag isn’t academic — persistent underperformance relative to objective comparators can be used as evidence of imprudence.
At the end of the day, most sponsors don’t want litigation. But they do want to protect participants and their own organization. A disciplined, documented investment monitoring process isn’t just best practice — in today’s environment, it may be your best defense.
