This class action brings suit against the Northern Trust Company and its Employee Benefit Administrative Committee and its members for failing to properly monitor and replace poorly-performing investment options in the company’s retirement plan, the Northern Trust Company Thrift-Incentive Plan. The complaint alleges that the defendants have breached their fiduciary duties under the Employee Retirement Income Savings Act (ERISA).
The class for this action is all participants and beneficiaries of the plan who invested in any of the Northern Trust Focus Target Retirement Trusts, from June 1, 2015 through the present.
The complaint alleges the company and the committee “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 … despite their continued underperformance.”
Under ERISA, those who handle retirement plans are considered fiduciaries of the plan. Fiduciaries must fulfill the duties of prudence and loyalty towards the plan.
As to prudence, the complaint quotes the findings of an earlier case, saying, “A plaintiff may allege that a fiduciary breached the duty of prudence by failing to properly monitor investments and remove imprudent ones.” The complaint alleges that “poor investment performance can significantly impair the value of a participant’s account” over time, as even small differences in performance add up.
The Focus Funds in question are target-date funds. Target-date funds are designed for the investors’ approximate expected retirement time and aim to achieve different investment aims over different time periods over the investors’ working lifetimes. They have become increasingly popular, the complaint says: “By the end of 2020, more than 50% of 401(k) investors had all of their 401(k) assets in target date funds, according to a Vanguard study.”
The popularity of target date funds, the complaint says, means that those who choose the investments available in retirement plans have “hundreds of different target date funds to choose from…”
Not only did the defendants allow the poorly-performing Focus Funds to remain as investment options in the plan. The complaint says they also choose them as the default investment options for participants. “That is, if participants do not make investment fund elections, the Plan automatically invests their contributions, along with any matching contributions and/or earnings, in one of the Northern Trust Focus Funds based on their age.”
The funds were never prudent options, the complaint alleges, even when they were first chosen, because the funds were already performing poorly as compared to benchmark indexes. The complaint included charts and tables that compare the performance of the Focus Funds with other, similar funds.
Article Type: LawsuitTopic: Employment
Most Recent Case Event
Northern Trust Retirement Plan Imprudent Investment Options Complaint
June 1, 2021
This class action brings suit against the Northern Trust Company and its Employee Benefit Administrative Committee and its members for failing to properly monitor and replace poorly-performing investment options in the company’s retirement plan, the Northern Trust Company Thrift-Incentive Plan. The complaint alleges that the defendants have breached their fiduciary duties under the Employee Retirement Income Savings Act (ERISA).
Northern Trust Retirement Plan Imprudent Investment Options ComplaintCase Event History
Northern Trust Retirement Plan Imprudent Investment Options Complaint
June 1, 2021
This class action brings suit against the Northern Trust Company and its Employee Benefit Administrative Committee and its members for failing to properly monitor and replace poorly-performing investment options in the company’s retirement plan, the Northern Trust Company Thrift-Incentive Plan. The complaint alleges that the defendants have breached their fiduciary duties under the Employee Retirement Income Savings Act (ERISA).
Northern Trust Retirement Plan Imprudent Investment Options Complaint