'Cookie Cutter' BlackRock TDF Suits Should Be Tossed: Retirement Groups

The plaintiff’s “myopic fixation on a single variable among many that fiduciaries must consider in determining plan investment offerings creates a particularly menacing prototype for fiduciary strike suits, seeking a declaration that a fund suite is per se imprudent notwithstanding its fees, risk profile, or rating among market analysts — all of which the Complaint and its sources acknowledge are exemplary for the BlackRock fund suite here — among other factors,” the groups state.

The plaintiff’s theory, the groups’ brief continues, “is also badly out of sync” with the law on fiduciary duties.

“It is beyond dispute that if a fiduciary made annual decisions based solely on past performance, the fiduciary would breach his or her duty of prudence by ignoring the vast majority of other factors that must be considered, including risk tolerance, diversification, quality of management, and the nature of the covered workforce,” the groups’ brief states.

“Indeed, if the Complaint (or any of its roughly one dozen identical copies filed simultaneously against other plan fiduciaries) survives a motion to dismiss, plan fiduciaries across the United States will be rendered vulnerable to suit for including any fund options that prioritize low management fees, risk mitigation, or any other factor a prudent fiduciary may consider over past returns,” the brief states.

Such an approach, it adds, “would also lead to disastrous fiscal results, with plan fiduciaries consistently buying high and selling low, all in the futile pursuit of past performance.”

Next Steps

Andrew Banducci, senior vice president, retirement and compensation policy, at the ERISA Industry Committee told ThinkAdvisor Monday in an email that the three groups haven’t decided if they will filed briefs in the other cases.

The Booz Allen case “is procedurally ahead of the other ones,” Banducci said. “We’re supportive of the judge granting a motion to dismiss the complaint” against the company.

The other companies that have been sued are:

Cisco Systems
Citigroup
Stanley Black & Decker
Wintrust Financial
Capital One Financial Corp.
Genworth Financial
Microsoft
Marsh McLennan
Advance Publications
CMFG Life Insurance Co.