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Regulation and Compliance > Litigation

Citigroup, Genworth Face Lawsuits Over BlackRock TDFs in Their 401(k)s

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Citigroup and Genworth Financial are among at least six firms that are facing class-action lawsuits filed since Friday over “underperforming” target date funds from BlackRock.

The lawsuit against Citigroup, filed Friday in the U.S. District Court for the District of Connecticut, was brought by Juliette Motz and Vivek Shah as participants in the Citi Retirement Savings Plan on behalf of similarly situated participants and beneficiaries in the LifePath Index Funds, a suite of 10 TDFs.

The lawsuit against Genworth was filed Tuesday in the U.S. District Court for the Virginia Eastern District against Genworth Financial and administrators of the company’s 401(k) plan. The law suit, brought by Tycko & Zavareei and Miller Shah LLP, involves underperforming BlackRock LifePath Index Funds.

Other targets of recent lawsuits involving the BlackRock target date funds include Cisco Systems, Capital One, Booz Allen Hamilton and Stanley Black & Decker.

Citi Suit Details

The Citi plan lineup has, since at least Dec. 31, 2009, offered the BlackRock LifePath Index Funds, among other investments.

The BlackRock TDFs “are significantly worse performing than many of the mutual fund alternatives,” according to the suit.

As of Dec. 31 2020, the plan had 109,634 participants with account balances and assets totaling approximately $17.91 billion, placing it in the top 0.1% of all defined contribution plans by plan size, the suit states.

“Defendants were responsible for crafting the Plan lineup and could have chosen from a wide range of prudent alternative target date families offered by competing TDF providers, which are readily available in the marketplace, but elected to retain the BlackRock TDFs instead, an imprudent decision that has deprived Plan participants of significant growth in their retirement assets,” the suit states.

“A simple weighing of the merits and features of all other available TDFs at the beginning of the Class Period would have raised significant concerns for prudent fiduciaries and indicated that the BlackRock TDFs were not a suitable and prudent option for the Plan,” the suit said. The suit claims that “any objective evaluation of the BlackRock TDFs would have resulted in the selection of a more consistent, better performing, and more appropriate TDF suite.”

Instead, the suit continues, “as is currently in vogue, Defendants appear to have chased the low fees charged by the BlackRock TDFs without any consideration of their ability to generate return. Had Defendants carried out their responsibilities in a single-minded manner with an eye focused solely on the interests of the participants, they would have come to this conclusion and acted upon it.”

Defendants, the suit maintains, “failed to act in the sole interest of Plan participants and breached their fiduciary duties by imprudently selecting, retaining, and failing to appropriately monitor the clearly inferior BlackRock TDFs.”

BlackRock did not respond to a request for comment as of press time.

(Photo: Bloomberg)