“A proposed class action lawsuit filed by a participant in Target Corporation’s 401(k) plan alleges the company violated its fiduciary duties under the Employee Retirement Income Security Act (ERISA) by continuing to allow participants to invest in the company stock fund when it was no longer prudent.”1
In the case of Knoll vs. Target Corporation the plaintiff complains that the defendant should have closed the opportunity for plan participants to invest in the Target Corp. fund itself. Alternatively, the plan sponsor should have directed these funds to be invested in the plan’s default investment option.
Things to Consider
Twenty years ago, the vast majority of company retirement plans were pensions. Employees worked until full retirement age, and their steady pensions allowed them to thrive in retirement.
Since that time, companies have gradually realized that they cannot afford to pay out the same pensions that once rewarded their valued retirees. Today, only a small portion of company retirement plans offer a set pension for their employees. In 2016, 401(k) plans make up a staggering majority of retirement plans across the United States.
Although the Knoll case is still just in its beginning stages, no company wants to be in the defending end of a turbulent case such as this one.
Here are the things we can learn from this case:
Plan Sponsors should actively review the investment options that are offered to plan participants. Does the person signing the 5500 understand the validity of every fund within the plan?
Does the plan sponsor have a signed Investment Policy Statement (IPS) that provides the backbone to investment reviews? How often is that IPS reviewed, and how often are these reviews documented?
Does your retirement plan have a Qualified Default Investment Option (QDIA)? If so, do plan participants understand what their QDIA is and why you’ve chosen this option?
Are you worried about becoming the next company to headline the 401k news? Are you monitoring the investment options in your retirement plan as closely as you should be? Give us a call, and we’ll be glad to answer your questions.
This information is for general use with the publc and is designed for educational and informational use only. It is not intended or should be construed as investment advice and is not a recommendation for retirement savings.
1 Rebecca Moore “401(k) Participant Sues Target over Company Stock” Plan Advisor,n.p., July 15, 2016, website, July 18, 2016.