401(k) lawsuit over BlackRock funds dismissed against CMFG Life Insurance

A federal judge in Madison, Wis., has dismissed a lawsuit by former CMFG Life Insurance Co. employees, who claimed the company and its 401(k) plan fiduciaries had violated ERISA by retaining a BlackRock target-date series that they had alleged performed worse than a selected group of other providers' target-date series.

"The court agrees with defendants that plaintiffs' allegations are insufficient to support a fiduciary breach claim under ERISA," U.S. District Court Judge William M. Conley wrote Jan. 26 in Abel et al. vs CMFG Life Insurance Co. et al. "Prudence is not measured in a vacuum; rather, courts must look at the context in which the fiduciary made the investment decision, including available alternative investments." BlackRock is not a defendant.

This is one of 11 lawsuits filed against different plan sponsors by the same law firm — Miller Shah — making the same allegations of poor performance for BlackRock's LifePath Index Funds when compared with four other target-date series.

Among the cases for which there has been a ruling, seven others have been dismissed.

In Kistler et al. vs. Stanley Black & Decker Inc. et al., a federal judge issued a split decision, granting part of a motion to dismiss and denying another part. Another lawsuit has survived a motion to dismiss, Trauernicht et al. vs. Genworth Financial Inc. et al. BlackRock is not a defendant in any of the 11 lawsuits.

In the Genworth case, "the plaintiffs included additional allegations in an amended complaint, including that the defendants failed to even discuss or consider BlackRock TDFs' performance compared to other options during the relevant time period and that one of the comparator TDFs was identified in plan documents as an appropriate benchmark," Conley wrote.

In the CFMG case, plaintiffs undercut their complaint by providing some data showing the BlackRock target-date series didn't always trail their peers, the judge wrote. They also failed to allege no "red flags that defendants disregarded," such as investors abandoning the target-date series, self-dealing, conflicts of interest or excessive fees.

"Allegations that the BlackRock TDFs typically, if modestly, underperformed relative to the comparator TDFs for a limited number of years are not enough to carry plaintiffs' claims of breach of defendants' fiduciary duties past the pleading threshold," Conley wrote, noting that plaintiffs relied on "the performance of their cherry-picked comparator TDFs" to bolster their complaint.

The judge told plaintiffs they could file an amended complaint by Feb. 26 "if there is a good faith basis for doing so."

CUNA Mutual 401(k) Plan for Non-Represented Employees, Madison, Wis., had $875 million in assets as of Dec. 31, 2022, according to the latest Form 5500. CUNA Mutual Group is the parent company of CMFG Life Insurance Co.