Northern Trust target dates called out in two 401(k) lawsuits

Two 401(k) plan lawsuits filed over the past several days by the same law firms involve Northern Trust’s target-date CITs.

The complaints, brought by the Law Offices of Michael M. Mulder and Scott and Scott, separately name Allstate Corporation and Northern Trust Company. The two complaints are very similarly worded, with both alleging that the plan sponsors breached their fiduciary duties by opting for the North Trust target-date collective investment trust series and continuing to keep it on their plan menus for years.

“Despite a market flush with better-performing alternatives, defendants selected the Northern Trust Focus Funds to be the plan’s target date asset class investment option,” the two complaints both stated. “For nearly a decade, the Northern Trust Focus Funds have performed worse than 70% to 90% of peer funds.”

The cases were brought in U.S. District Court in the Northern District of Illinois Eastern Division. The lawsuit against Allstate was filed Oct. 30, and the one against Northern Trust was brought on Nov. 2.

Both cases cite Morningstar data pointing to stronger net returns for years in target-date products from American Funds, T. Rowe Price and Vanguard. Underperformance cost participants in the Northern Trust plan a projected $34 million in unrealized potential returns since 2014, while participants in the Allstate plan suffered an alleged $65 million shortcoming, according to the complaint.

Allstate’s plan represents more than $5 billion, about $763 million of which is invested in the Northern Trust Focus Funds, according to the complaint in that case. The more-than $2 billion Northern Trust plan included $350 million in the target-date series, the other lawsuit stated.

Both cases seek class-action status and allege breach of fiduciary duty, breach of co-fiduciary duty and failure to monitor. Each also seeks to have the defendants make good on the alleged losses, disgorgement of profits, other relief and attorneys’ fees. The plaintiffs are also asking to have the plan menus reformed “to include only prudent investments.”

Northern Trust declined to comment on the litigation. Allstate did not respond to a request for comment.