Employees of IBM have filed a class action lawsuit.
According to the documents filed in the US District Court for the Southern District of New York, the defendants allege that the company’s pension Plan fiduciaries breached their duties by “by: retaining underperforming investment options—(i) the IBM Target Retirement Fund Series, (ii) the IBM Target Risk Fund Series, and (iii) the Vanguard—for the Plan between 2019 and 2025, despite more suitable target date funds, target risk funds, mid-cap, large blend, and dividend growth funds having been readily available.”
They also claim that IBM engaged in transactions prohibited by ERISA; and failed to monitor the fiduciaries responsible for administration and management of the Plan’s actions in retaining the imprudent IBM TDF Series, IBM Risk Series, and Vanguard Funds as investments for the Plan. This, they say, has resulted in the loss of more than $1.9 billion of assets for the Plan and its participants.
According to reports, as of the end of 2024, approximately $13.4 billion of the nearly $60 billion of the Plan’s assets was allocated to IBM’s proprietary funds, while an additional $454 million was invested in the three Vanguard mutual funds. According to the complaint, from 2016 to 2024, IBM’s target-retirement and target-risk funds underperformed comparable funds by as much as 20% to 30%, depending on the particular vintage.
The complaint also claims that IBM used “custom benchmarks” to monitor the funds’ performance, which obscured the alleged underperformance.
The plaintiffs are represented by Kahn Swick & Foti LLC. The IBM 401 (K) Plan had approximately $60.4 billion in assets with 156,865 plan participants at the end of 2024, according to its most recent Form 5500 filing.
IBM has not publicly commented on the lawsuit. The outcome of this case could have significant implications for the management of its 401(k) plan and the financial security of its employees.
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