A recently filed proposed class action lawsuit against Molson Coors' 401(k) plan fiduciaries highlights the importance for 401(k) plan fiduciaries to carefully select and continually monitor all 401(k) plan investment options, including capital preservation options. The lawsuit alleges that plan fiduciaries breached their fiduciary duties of prudence and loyalty by selecting the Fidelity stable value fund offering and retaining it in the plan, even though it was significantly riskier and provided inferior returns than comparable funds. The lawsuit emphasizes that over $200 million was invested in the plan's Fidelity stable value fund during each year at issue. Interestingly, this lawsuit focuses solely on the plan's stable value fund investment option. At this early stage, the court has yet to rule on the lawsuit and it is unknown whether the lawsuit has merit.
Among 401(k) plan investment options, a plan's capital preservation offering may be the least glamorous and generate the least attention. A capital preservation fund will inherently have lower long-term rates of return and present less risk than other investment options. The range of returns among various capital preservation fund options will be narrower than with other types of funds. Some recordkeepers may even try steering 401(k) plans towards their proprietary capital preservation offering more forcefully than with other types of funds. However, even without a ruling by the court, this new lawsuit highlights the importance for plan fiduciaries to carefully select—and regularly monitor—all plan investment options, including the plan's stable value or money market fund.
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