What You Need to Know
- Northern Trust breached its fiduciary duties to prudently select and monitor the plan’s investment options, suit says.
- For nearly a decade, Northern Trust Focus Funds have performed worse than 70% to 90% of peer funds, suit says.
- The Northern Trust Focus Funds are the plan’s default investment options.
Northern Trust was hit with an ERISA class-action suit Tuesday for loading its retirement plan with “poorly performing” proprietary target date funds that underperformed similar offerings.
The suit, filed in the U.S. District Court for the Northern District of Illinois, was brought by current and former Northern Trust employees.
It argues that the firm, based in Chicago, breached its fiduciary duties to prudently select and monitor the plan’s investment options, including by automatically enrolling participants in the firm’s target date funds, the Northern Trust Focus Funds.
Northern Trust, the suit states, “failed to regularly monitor plan investments and remove or replace ones that become imprudent. Instead, in disregard of their fiduciary duties, defendants loaded the plan with poorly performing proprietary funds called the Northern Trust Focus Target Retirement Trusts … and then kept these Funds on the Plan’s investment menu throughout the Class Period despite their continued underperformance.”
Northern Trust said in a statement shared with ThinkAdvisor that it “believes the Northern Focus Funds have been an appropriate vehicle for retirement savings, and plans to defend itself from the lawsuit’s claims.”