Booz Allen Hamilton to Face ERISA 401(k) Plan Mismanagement Class Action

On August 1, 2022, Michael Tullgren (“Plaintiff”) filed a complaint on behalf of himself and similarly situated class members against Booz Allen Hamilton Inc. (“Booz Allen” or “Defendants”) in the United States District Court for the Eastern District of Virginia.

Booz Allen, a management and information technology consulting firm, is the plan sponsor for the Booz Allen Hamilton Inc. Employees’ Capital Accumulation Plan (the “Plan”). As of December 31, 2020, the Plan had over 44,000 participants with account balances and assets totaling approximately $6.76 billion, placing it in the top 0.1 percent of all defined contribution plans by plan size.

Plaintiff, represented by Miller Shah LLP and Tycko & Zavareei LLP, alleges that Booz Allen breached its fiduciary duties to the Plan under the Employee Retirement Income Security Act of 1974 (“ERISA”), a federal statute that protects workers by establishing standards, known as fiduciary duties, to ensure that investments offered to employees are prudently selected and monitored.

Specifically, Plaintiff alleges that Defendants imprudently selected and retained the BlackRock LifePath Index Funds (“BlackRock TDFs”), a suite of ten Target Date Funds (“TDFs”). Plaintiff argues that compared to alternative available TDFs, the BlackRock TDFs are a “vastly inferior retirement solution,” and that throughout the relevant period, many comparable TDF options “consistently and dramatically outperformed the BlackRock TDFs.”

Plaintiff argues that a simple comparison of the BlackRock TDFs to other available TDF suites “would have resulted in the selection of a more consistent, better performing, and more appropriate” suite. At all stages, the returns of the BlackRock TDFs “paled in comparison to those of readily available alternatives.” [1] Instead, according to Plaintiff, “Defendants appear to have chased the low fees charged by the BlackRock TDFs without any consideration of their ability to generate return.”

Furthermore, Plaintiff maintains that Defendants imprudently designated the BlackRock TDFs as the Plan’s Qualified Default Investment Alternative (“QDIA”), the predetermined, automatic investment option for participants who do not indicate a specific fund in which to invest their retirement contributions. Plaintiff argues that since the vast majority of participants are not sophisticated investors, “many, by default, concentrate their retirement assets in TDFs,” magnifying the impact of Defendants’ imprudent decision-making process. Indeed, as of December 31, 2020, approximately 29% of the Plan’s assets were invested in the BlackRock TDFs, resulting in the loss of millions of dollars in potential retirement savings for participants.

Defendants have not yet filed a response to Plaintiff’s complaint. The Honorable Michael S. Nachmanoff, United States District Judge in the Eastern District of Virginia, is assigned to the case.

Updates will be posted to this blog as the matter progresses. The case caption is Tullgren v. Booz Allen Hamilton Inc. et al, No. 1:22-cv-00856, filed in the Eastern District of Virginia.

The legal team at Miller Shah LLP has extensive experience representing class action matters. If you have any questions regarding this subject or this post, please contact Alec Berin (ajberin@millershah.com) or Nicholas Ono (nkono@millershah.com). The Firm can also be reached toll-free at (866) 540-5505.

[1] The complaint compares the BlackRock TDFs to other popular available TDF suites: Vanguard Target Retirement, T. Rowe Price Retirement, American Funds Target Date Retirement, and Fidelity Freedom Index.