On August 2, 2022, Justin Beldock, Gordon Broward, and Shaadi Nezami (collectively, “Plaintiffs”) filed a complaint on behalf of themselves and similarly situated class members against their former employer, Microsoft Corporation (“Microsoft”), in the United States District Court for the Western District of Washington.
Microsoft is the plan sponsor for the Microsoft Corporation Savings Plus 401(k) Plan (“the Plan”). As of December 31, 2020, the Plan had over 135,000 participants with account balances and assets totaling over $38 billion, placing it in the top 0.1 percent of all defined contribution plans by plan size.
Plaintiffs, represented by Miller Shah LLP and Terrell Marshall Law Group PLLC, allege that Microsoft breached its fiduciary duties to the Plan under the Employee Retirement Income Security Act of 1974 (“ERISA”), a federal law that establishes standards of conduct for private industry retirement plans to protect workers.
According to Plaintiffs, Microsoft selected, retained, and/or otherwise ratified poorly‐performing investments instead of offering more prudent alternatives that were readily available at the time and throughout the proposed Class Period.
Specifically, Plaintiffs allege that Defendants imprudently selected and retained the BlackRock LifePath Index Funds (“BlackRock TDFs”), a suite of ten Target Date Funds (“TDFs”). Plaintiffs argue that a simple comparison of the BlackRock TDFs to other prominent TDF suites in the marketplace would have illuminated their inappropriateness for the Plan, as the three- and five- year annualized returns of “the entire suite, bar [one vintage], ranked in the bottom half among the Comparator TDFs.”
According to Plaintiffs, “Defendants appear to have chased the low fees charged by the BlackRock TDFs without any consideration of their ability to generate return.”
Plaintiffs also note that the BlackRock TDFs were the Plan’s Qualified Default Investment Alternative during the proposed Class Period, meaning that if participants do not elect to allocate their retirement contributions to a specific fund, the money is automatically invested in the vintage of the BlackRock TDFs closest to the participant’s assumed retirement date. Indeed, as of December 31, 2020, approximately 24% of the Plan’s assets were invested in the BlackRock TDFs. Accordingly, Plaintiffs assert that participants lost the opportunity to earn millions of dollars in potential retirement savings.
Defendants have not yet filed a response to Plaintiffs’ complaint. The Honorable James R. Robart, senior judge for the United States District Court for the Western District of Washington, is assigned to the case.
Updates will be posted to this blog as the matter progresses. The case caption is Beldock et al. v. Microsoft Corporation et al., No. 2:22-cv-01082, filed in the Western District of Washington.
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 TDFs are mutual funds offering an all‐in‐one retirement solution through a portfolio of underlying funds that gradually shifts to become more conservative as the assumed target retirement year approaches.