BENEFITS DIGEST

Decumulation, the spend-down phase after retirement, is where target-date competition has moved, and sponsors field the how-much-can-I-withdraw question whether or not their lineup has an answer. Capital Group’s new withdrawal guidelines are one vendor’s answer, a fixed approach starting around 4% to 4.5% of the initial balance and adjusting for inflation, and a variable approach taking around 5% to 5.5% of the prior year-end balance. The guidance comes from the firm’s modeling of 100,000 market paths over 30 years, and modeled sustainability is not a promise. The firm is also adding retirement-income wording to the names of its 2010 through 2025 in-retirement funds, not the entire target-date series.

Three participants sued Citizens Financial Group and its plan fiduciaries over the CFG Retirement Savings Plan, which the complaint says held $3.22 billion for 23,881 participants with balances at the end of 2024. The investment claims challenge the retention of Fidelity Freedom Index target-date funds and Vanguard index funds, with the comparisons collected in an [appendix](https://digest.theinnerfirm.com/docs/davis-v-citizens-appendix-2026-10-19.pdf). Separate claims target administrative fees and the use of forfeitures, the employer contributions workers leave behind before vesting, to reduce company contributions rather than participant expenses, plus monitoring and prohibited-transaction theories. The forfeiture-allocation claim is aimed at the discretionary period before a January 2025 plan amendment reprioritized how forfeitures are used. These are allegations in a newly filed complaint, and no class has been certified.

Alight’s 401(k) index recorded just four above-normal trading days in the entire third quarter, against ten in the second, with 0.18 percent of assets changing funds. Even the Federal Reserve’s September 16 rate increase didn’t produce an above-normal trading day. The only busy day of the month came the day before the announcement, and the ten days after it never reached above-normal volume. What trading occurred leaned steadily toward safety. Fixed-income funds drew net inflows on 81 percent of September’s trading days, up from 50 percent in July, with money going to stable value, money market and bond funds while large-cap equity and target-date funds had net outflows. Alight’s read is that automatic enrollment and target-date defaults have simply removed most participants from day-to-day investing, and that the drift toward fixed income looks like modest rebalancing rather than flight from stocks.

Five former Wells Fargo employees allege that the company’s 401(k) fiduciaries kept three investments despite years of weak results, costing participants roughly $1.04 billion compared with the alternatives identified in their complaint. The targets are a custom large cap growth fund that trailed its disclosed index and four named peer funds on every standard measuring window from 2018 through 2025, a small cap fund the complaint says should have been removed at the end of 2022, and the State Street target date series the $58 billion plan adopted as its default investment in March 2023 despite a published record behind two of the three comparator series. To support each comparison, the plaintiffs match the funds on holdings, sector weights, risk and fees, and offer three benchmarks apiece, the fund’s own disclosed index, an investable index fund tracking it, and a set of peer funds. A separate count alleges the plan kept paying investment fees to an affiliated manager for fourteen months after Wells Fargo settled an earlier suit over the same plan for $32.5 million in 2022. Wells Fargo hasn’t yet responded in court.

NAPA covers the Erickson v. Lockton complaint, filed October 1 in the Western District of Missouri, the latest in a series of Capozzi Adler suits against employers that also broker their own voluntary benefits programs. The suits allege the same core facts. The employer, acting as its own broker, sets the commissions, paid upfront or spread over time, and the administration fee, so the premiums employees pay by payroll deduction reflect the broker’s own compensation choices. The complaint argues that collecting $3.3 million in commissions and fees from employee-paid premiums prevents the program from qualifying for the exemption that keeps voluntary benefits outside ERISA. Nevin Adams notes that Capozzi Adler has also sued Marsh & McLennan, USI Insurance Services and Arthur J. Gallagher over their voluntary benefits programs. The law firm separately represents participants challenging the target date funds in Lockton’s own 401(k) plan.

A new ICI and ISS Market Intelligence profile of large ERISA 403(b) plans, built from Form 5500 filings for 5,332 plans with at least 100 participants, finds employer contributions reached $13 billion in 2023, two and a half times the 2009 figure. Costs moved the other way. The average participant was in a plan costing 0.45 percent of assets in 2023, down from 0.68 percent in 2009. The share of large plans offering an employer contribution rose from 71 percent to 87 percent, target-date funds spread from about half of plan menus to 90 percent, and index funds now hold 42 percent of plan assets. For 403(b) sponsors wondering how their plan compares, the benchmarks just got a refresh.

Ron Surz questions how personalized an investment service can be when it's chosen automatically for workers who haven't provided any information about their finances or comfort with risk. A qualified default investment alternative is the investment a 401(k) plan uses for employees who never make a choice, so, he argues, the personalization in a managed-account default rests entirely on recordkeeper data about age and wealth, with no read on how much risk the person is willing to take. Of the roughly $16 trillion the research firm Cerulli counts in managed accounts across workplace plans and IRAs, Surz puts less than $1 trillion in the default version, and a 2024 survey by the consulting firm NEPC found 46% of plans offer managed accounts while only 9% default participants into them. He favors customized target-date funds built to workforce demographics instead.

Roughly half of plan sponsors offer managed accounts, professionally managed investments tailored to the individual participant, but the research firm Cerulli finds only about 5 percent of participants use one. Brokerage windows, which let participants buy investments beyond the plan's own menu, show up in 29 percent of plans, rising past 60 percent among the largest. The panel urged employers considering any personalized option to ask whether workers would actually use it and whether the added cost over a target-date fund is justified for workers whose finances are still simple. Customization that looks past age and risk tolerance to outside assets, spousal income, and Social Security timing costs more than the default it replaces.

Fred Barstein argues that guaranteed-income options have struggled to gain ground in 401(k) plans despite 20 years of predictions. Nothing requires them, few sponsors ask for them, and advisers' financial incentives, he argues, can favor rollovers over income products offered inside a plan. He cites T. Rowe Price data that 76 percent of billion-dollar plan sponsors want to retain participant assets while more than 95 percent of smaller plans don't. He predicts adoption will arrive the way target-date funds arrived, through automatic enrollment into a default investment that includes a guaranteed income component, not through persuading participants one at a time.

Two participants in Principal’s $4.6 billion Select Savings Plan allege the menu is Principal top to bottom, with the only exceptions company stock, two SEI trust funds and a brokerage window. The sharpest allegation goes to fees on five insurance investment accounts. The participants claim Principal Life keeps between 19 and 37 percent of the management fee on those accounts even though outside firms manage the investments. A second count challenges the proprietary target-date funds, built on Principal index funds the complaint says cost several times what BlackRock, Northern Trust and Vanguard charge for the same exposure, and the retention of a large-cap growth fund that trailed the Russell 1000 Growth index in every reported period. Chimicles Schwartz Kriner and Ellzey Kherkher filed September 22 in Chicago federal court. Principal hasn’t yet responded in court.

The last claim standing in Phillips v. Cobham Advanced Electronic Solutions, the 401(k) suit against the aerospace company now owned by Honeywell, was that the plan refused participants' request for its investment policy statement, a failure that can carry personal penalties under ERISA. Judge Eumi Lee ended the case without deciding whether an investment policy statement is among the documents a plan must furnish; these plaintiffs lacked standing to ask. Two had cashed out their accounts about two years before the 2022 request, the third offered no evidence she would have done anything differently, and a missing document is not an injury by itself without some downstream consequence. The prudence claims over the plan's American Century target-date funds were dismissed last year under the Ninth Circuit's Anderson v. Intel decision, which the Supreme Court reviews on October 6. Anderson asks what investment comparisons participants must offer to support a claim that retirement-plan options performed poorly.

A retrospective on six July decisions: the Ninth Circuit's refusal to compel arbitration in the Capital Group 401(k) self-dealing suit, the largely denied dismissal motion in the O'Reilly Automotive tobacco-surcharge case, Elevance's forfeiture-suit dismissal with 40 days to amend, the standing-based dismissal of the ATI and State Street pension risk transfer suit, the Dish Network target-date-fund case ordered to trial, and the D.C. Circuit's partial reversal of a $13 million withdrawal-liability judgment won by the IAM National Pension Fund.

Invesco's summer survey of 517 DC participants found interest running ahead of understanding. Asked to identify private-market asset types, participants averaged 3.4 of 5. Seventy-eight percent flagged private equity, but only 41 percent recognized commercial real estate, and 28 percent called cryptocurrency a private asset. Ninety-three percent understood the higher-fee, potentially-higher-return trade-off. What would help, participants said: clearer risk and return explanations (43 percent) and real-world examples, and 65 percent expressed interest in a target-date fund with a modest private-markets allocation. Employees may need basic explanations of these investments before choosing them.

A lawsuit challenging Dish's choice of retirement funds can proceed toward trial. In Jones v. Dish Network, a certified class of about 17,000 participants in Dish's $1.6 billion 401(k) plan alleges the plan held on to Fidelity Freedom Funds despite years of underperformance against similar funds. The court declined to end the case before trial because disputed facts remain, and faulted the record on the company's side. Per the alert, Dish "hasn't provided a substantive fund performance analysis that would allow a decision on the duty of prudence issue."

CFA Institute's modeling found that private equity and venture capital offered the strongest potential to grow retirement balances. Private debt, infrastructure, and real estate produced lower average returns and played a more defensive role. Changing how a target-date fund adjusts its investments during the final decade before retirement affected outcomes more than the private-market allocation itself. The findings suggest that choosing how these investments fit into a fund matters more than simply making them available.

Two data points for the debate the comment file above was supposed to inform. CFA Institute modeled private equity, private debt, infrastructure, real estate, and venture capital inside target-date glide paths and reached a two-sided result: funds with private equity allocations generally produced higher average retirement balances, but a 10 percent allocation didn't materially change where a participant lands over a working career, and contribution rates and time in the plan mattered more than the allocation. “Opening access is not the same as improving retirement outcomes,” the institute's Olivier Fines said. Participants, meanwhile, sound willing: Invesco's summer survey of 517 large-plan participants found 58 percent view the higher-fee, higher-potential-return trade-off favorably and 65 percent would rather reach private markets through a target-date fund than pick the assets themselves.

U.S. retirement assets rose 7.9 percent during the second quarter to $51.2 trillion, according to ICI's quarterly tally. At June 30, IRAs held $19.9 trillion and defined contribution plans held $15 trillion, including $10.8 trillion in 401(k)s. Within 401(k) mutual fund holdings, hybrid funds, which include target-date funds, held $1.7 trillion. Stock funds were the largest category.

The series on the DOL's alternative assets proposal reaches its third performance benchmark example, a target date fund holding only publicly traded securities. The fiduciary in the example builds a custom composite benchmark blending broad indices to match the fund's asset allocation, reviews it analytically, and compares performance component by component rather than in the aggregate, down to matching a 10 percent small cap growth sleeve with a 10 percent small cap growth index. The practical point is candid. This example is the easiest case the proposal will ever present, a fund holding nothing but publicly traded securities, and building a meaningful benchmark for it is already a heavy lift. Once private assets enter the mix, the lift gets heavier.

The long-running alternative-assets series reaches the proposal's liquidity factor, and the reading is more permissive than sponsors might expect. The DOL's proposed regulation lists six factors for vetting alternatives in participant-directed plans; on liquidity, it says a prudent process may sacrifice some plan or individual level liquidity in pursuit of additional risk adjusted return. The analysis runs on two levels: participant liquidity, where daily trading will remain the practical demand, and plan liquidity, where the question is how hard an option is to remove once chosen. The prediction is that private fund allocations will arrive mostly inside target date funds, which can pair daily participant trading with a 60 to 90 day removal window.

Participants barely touched their accounts in August. Average daily net trading was 0.008 percent of balances, the lowest August reading in the index's thirty years of data. When money did move, it went defensive: fixed income was favored on 14 of 21 trading days, with bond funds taking 49 percent of net inflows while large U.S. equity, target date funds, and company stock supplied the outflows. Target date and large-cap equity funds together now hold about 60 percent of all 401(k) assets in the index, up from roughly 40 to 45 percent two decades ago.

Fidelity's survey of 1,311 plan sponsors finds 41% now want their adviser to hold full discretion over the investment menu, up from 36% last year, and 89% plan to add investment options within a year. Half are weighing a replacement of their target date funds, with versions carrying embedded annuities or stable value drawing the most interest, and the help sponsors most want from advisers is on legislative and fiduciary issues.

New Vanguard research finds 80% of participants under 35 hold only a target-date or balanced fund, versus 43% of those 55 and older, and the share of all participants using a single fund jumped from 46% in 2016 to 66% in 2025. Menus keep shrinking in response, though Vanguard cautions that participants nearing retirement may still benefit from a broader lineup.

Sixty-one percent of participants on Vanguard's recordkeeping platform held a single target-date fund in 2025, up from 46 percent in 2016, and 66 percent held just one fund of any kind. Vanguard credits automatic enrollment, which nearly 80 percent of large plans now use, and target-date defaults for the simplification.

The Pension Protection Act (PPA) didn't invent automatic enrollment, target-date funds, or professional investment management. But it was arguably a transformative shift in the design of workplace retirement plans, and the focus of those who support them.

Target-date assets are positioned for another leg of growth as demand shifts toward personalization and retirement-income features. A companion data point to the $5.3 trillion TDF market coverage in Tuesday's issue.

In a published opinion, the Eleventh Circuit reversed summary judgment for Royal Caribbean in the imprudence suit over its proprietary Russell target-date funds, holding that a plaintiff need not identify an apples-to-apples comparator to establish objective imprudence in every case. Qualitative evidence such as a fund's unpopularity and negative analyst ratings can carry the point, and a fund's own custom benchmark is not automatically the only proper measuring stick when the plaintiff's theory is that the benchmark's built-in features are what made the fund imprudent.

A Minnesota federal judge allowed target-date imprudence and self-dealing claims against 3M to proceed after finding the amended complaint's Fidelity Freedom fund comparison a meaningful benchmark, while narrowing other theories. The suit was dismissed this spring with leave to amend for exactly this deficiency, so the ruling shows what a benchmark allegation that works actually looks like.

Twenty years after the Pension Protection Act made target-date funds the default, Sway Research maps a $5.3 trillion TDF market shifting toward collective investment trusts and retirement-income features.

The counterpoint to the 3M ruling, from the same Minnesota federal court: in Scholin v. Digi-Key, Judge Bryan dismissed a challenge to American Century target-date funds because the complaint never explained why its comparator funds were comparable, calling their composition a mystery. Together the two rulings sketch the line between benchmark allegations that survive and ones that don't.

A new complaint alleges fiduciaries selected underperforming target-date funds, and industry observers read it as a warning shot at wealth firms converging on the retirement plan arena. Fiduciary litigation following the money into the advisory consolidation wave.

The ADP fiduciary committee will review its retirement plan’s target-date funds as part of the settlement.

Incorporating guaranteed income into this already popular product presents a cost-effective, ‘pension-like’ strategy.

Recent analysis projects private capital could make up 6% of assets in defined contribution plans by the end of the decade, driven by gradual adoption through target-date funds, collective investment trusts and the DOL’s proposed safe harbor for fiduciaries.

Former employees at American Express (Amex) have filed suit alleging that the credit card company maintained underperforming funds in its 401(k) plan, including target-date funds (TDFs).

If your retirement plan holds American Century One Choice target-date funds, you have a target on your back. More than a dozen ERISA class actions have been filed against plans holding this single fund suite since early 2026, and the pace is accelerating

SpaceX's record-fast addition to the Nasdaq-100 means millions of retirement savers now have indirect exposure to the newly public company through index funds and some target-date portfolios.