Summary of Investigation

Cohen Milstein is investigating a number of issues concerning the selection and offering of investments known as “target date” or “life cycle” funds as choices in 401(k) plans.

What Are Target Date Funds?

Target date funds are investment funds (usually mutual funds) that are supposed to provide an investment strategy based on the expected or anticipated date of a person’s retirement.  As a result of this strategy, the asset allocation is supposed to become more conservative as the target date (usually the retirement date) approaches.  For example, early on in an employee’s career, the fund is likely to be more heavily invested in equities (stock), a more aggressive category of investments, and over the course of a person’s career, the fund likely becomes more heavily invested in less risky investments, such as bonds.  Frequently, target date funds can be identified by the use of a year (e.g. 2030) in the name of the fund itself.

Scope of the Investigation

This investigation looks into a number of different issues:

  • Improper Investment Strategy:  This could take several forms.  The actual investment strategy (e.g. the allocation between equities and bonds) may not be same as the fund advertised.  The fund may be pursuing a far riskier investment strategy than participants and plan sponsors are led to believe, even as plan participants near retirement.  As a result, plan participants’ retirement savings are put at risk, even as they are invested in what they believe are safe, dependable investments.
  • Excessive Fees:  The fees charged by a target date fund may not be justified by  the performance of the investment.  The fees for target date funds can vary significantly,  particularly depending on whether the fund’s fees are “layered” or the underlying  investments of the fund are actively or passively managed.
  • Self-Dealing or Imprudent Selection:  Many providers offer a wide variety of target date funds.  The fiduciary of the Plan may have chosen the particular provider for improper reasons.  For example, where the fiduciary of the Plan or the employer sponsoring the Plan markets a target date fund, it improperly chose its own target date funds without considering whether those funds are most appropriate for its own 401(k) plan participants.
  • Improper Default Selection:  A target date fund is classified as a Qualified Default Investment Alternative (“QDIA”), which means that participants who do not affirmatively choose an investment option for their 401(k) plan will have their retirement savings invested into target date funds by default.  Even where this is the default, the fiduciary of the plan has an obligation to ensure that the target date fund was prudently, properly, and appropriately selected.

If you are a participant in or the fiduciary of a Plan who is concerned about the target date fund in your 401(k) plan, you may contact us to review your plan’s information.  There is no fee for our initial review of and consultation on this matter.

What Information Do We Need From You

We will want to obtain some information in order to investigate your claim, including:

  • The plan document of your 401(k) plan
  • Account statements for your 401(k) account
  • The 401(k) Plan Fee Disclosure Form for your 401(k) plan
  • If not included elsewhere, the list of investment options included in your 401(k) plan

If you do not have copies of these documents, we can assist you in making a request for copies to the plan administrator.  There is no charge to you for us to assist you in making this request or for us to evaluate your case.

Whom to Contact for More Information

If you think you may have suffered losses to your retirement savings because your 401(k)’s target date fund is performing poorly or charges excessive fees or if you have information which might assist us in the investigation of such allegations, please contact one of the following persons:

Michelle C. Yau, Esq. myau@cohenmilstein.com
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005 
Telephone: 888-240-0775 or 202-408-4600