Wave of Lawsuits Targets 401(k)s Using American Century TDFs

Litigation attorney Todd Wozniak was cited in an article published by Ignites about a recent wave of Employee Retirement Income Security Act of 1974 (ERISA) lawsuits challenging 401(k) plan sponsors' use of American Century target-date funds (TDFs). As described in the article, plaintiffs in these cases allege plan fiduciaries imprudently retained funds that underperformed peer suites over multiyear periods, while practitioners note the difficulty of evaluating them based solely on trailing performance given differences in overall investment design. Mr. Wozniak discussed why fiduciary review of TDFs must take into account each fund's structure, objectives and risk profile, rather than relying on performance comparisons alone.

"Target-date funds are not a homogeneous category. Differences in glide path, equity exposure and underlying manager selection can lead to materially different outcomes over short- and intermediate-term periods," he said.

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