Ten weeks after a law firm began filing ERISA lawsuits against multiple sponsors for offering a BlackRock target-date series, one of those sponsors is fighting back.
Booz Allen Hamilton Inc. on Oct. 10 asked a federal district court in Alexandria, Va., to dismiss a complaint by a former 401(k) plan participant who alleged the company and plan executives violated ERISA by offering and retaining the BlackRock LifePath Index Fund.
The Aug. 1 ERISA complaint, which seeks class action status, was one of 11 lawsuits filed in rapid succession starting in late July, by the Miller Shah LLP law firm, either as lead attorney or co-counsel.
The Booz Allen Hamilton response assailed the plaintiff's arguments as "shaped from the vantage of hindsight."
If the court supports the plaintiff, the result "would effectively expose all employer-sponsored 401(k) plans to sweeping liability whenever the plan's fiduciaries select anything except investment options that end up generating the very best returns during a time period cherry-picked by any given plaintiff," the document said.
The 11 ERISA lawsuits made similar claims about the BlackRock target-date series against other 401(k) plans, including those offered by Microsoft, Citigroup and Cisco Systems.
The lawsuits against Booz Allen Hamilton and the other sponsors use the same set of comparisons matching the BlackRock target-date series vs. four other providers: American Funds Target Date Retirement (Capital Group) and T. Rowe Price Retirement, both of which are actively managed, plus Fidelity Freedom Index (Fidelity Investments) and Vanguard Target Retirement, both of which are passively managed.
The complaints said the BlackRock target-date series performed worse than the others. The lawsuits compared quarterly returns from the second quarter of 2016 through the second quarter of 2022. Each quarterly return was analyzed for three-year annualized results and for five-year annualized results.
BlackRock has responded to each lawsuit by saying its target-date series is "highly regarded by many fiduciary decision-makers and independent evaluators of investment products for delivering consistently strong outcomes for plan participants over time."
BlackRock isn't a defendant in any of the cases.
"The complaint fails to satisfy even the most foundational requirement of comparing the BlackRock TDFs to meaningful benchmarks, and its myopic focus on alleged investment underperformance is not enough, regardless, to demonstrate imprudence, as ERISA's fiduciary duties are rooted in process, not results," said the defendants' motion to dismiss in the case of Tullgreen vs. Booz Allen Hamilton Inc. et al.
"Plaintiff's thin and singular theory of fiduciary breach — that the plan's fiduciary process must have been imprudent because the BlackRock TDFs allegedly could have performed better — rests on so many unsupported and unsupportable allegations that it collapses under its own weight," said the motion dismiss.
The Booz Allen Hamilton Inc. Employees' Capital Accumulation Plan. McLean, Va., had assets of $6.76 billion as of Dec. 31, 2020, according to the latest Form 5500.
