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CommonSpirit (Catholic Health Initiatives) 401(k) Plan Target Date Case

Plaintiffs in this case allege that the plan sponsor breached fiduciary duties under ERISA through its offering of the Fidelity actively managed target date funds instead of a passively managed target date fund series. Also of issue was underperformance and excessive fees for two other funds offered, the American Beacon Large Cap Value Fund and the Allianz NFJ Small Cap Value Fund, as well as excessive administrative fees paid to the Plan’s recordkeeper, Fidelity. All counts filed by the plaintiff failed to proceed on the basis that it is not appropriate to compare active and passive funds, as suited to different investors with different risk/return profiles. It was noted that the Plan does also offer passively managed funds, in accordance with the fiduciary requirement of offering an array of investments with different management approaches. The claims regarding the two funds were dismissed, as the plaintiff failed to “provide meaningful benchmarks” for comparison. Likewise, the excessive administrative fee claim was dismissed as the comparative data cited was absent of revenue sharing.

www.investmentnews.com; September 13, 2021.