Is Your Target-Date Fund Lineup Ready for the Next ERISA Class Action?

By: Angela M. Stockbridge

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.

Here is what plan sponsors need to know: the sponsors who are most likely to come out ahead are the ones who build their defense before anyone filed a complaint. That means reviewing your lineup, documenting your process, and closing gaps in your fiduciary file proactively. 

What Is Driving the Litigation

The plaintiffs' theory in these cases is straightforward. Fiduciaries selected a target-date fund suite, left it in place for more than a decade, and never meaningfully revisited whether it still served participants well. The claims do not require plaintiffs to show that the original selection was imprudent, only that the ongoing failure to monitor and act on underperformance breached the duty of prudence under ERISA § 404(a)(1)(B). Many of the complaints add a second theory: that the plan held retail-class fund shares when cheaper institutional-class shares were available, costing participants money with no offsetting benefit.

These two theories (process failure and share-class mismatch) are driving a surge in filings. Nearly 70 proposed ERISA class actions were filed in Q1 2026, roughly double the prior-year pace. More than a dozen target plans holding American Century One Choice funds. The economics are favorable to plaintiffs: class certification succeeds roughly 95% of the time in ERISA cases, classes are typically certified as mandatory and no-opt-out under Rule 23(b)(1), and early settlements keep the pipeline full. NextEra agreed in March 2026 to pay $8 million on a complaint pairing excessive fees with misuse of forfeitures. Each resolution funds the next round of filings. None of the suits name the fund company. The target is always the plan fiduciary.

The Cases to Watch

The most recent filing is Goucher v. All Children's Health System, Inc., No. 8:26-cv-01781 (M.D. Fla. filed June 18, 2026), alleging that fiduciaries of the Johns Hopkins All Children's retirement plans kept participants invested in One Choice funds for over a decade despite underperformance, while also retaining more expensive share classes. The complaint seeks to represent approximately 6,600 participants. It follows the same template as more than a dozen similar filings earlier this year and arrives against a backdrop of diverging judicial outcomes. In March 2026, an Arizona court denied dismissal in a case where a single suite held roughly 43% of a $1.2 billion plan for more than 15 years, while other One Choice cases have been dismissed at the pleading stage. The Supreme Court has granted certiorari in Anderson v. Intel to resolve how much comparator detail a plaintiff must plead, but will not hear the case until October 2026 term, with a decision expected by mid-2027. Until then, outcomes depend heavily on venue and the judge assigned.

What Plan Sponsors Should Do Now

The steps below are not contingent on holding American Century One Choice specifically. Any plan sponsor that has not recently pressure-tested its target-date fund selection, monitoring documentation, and share-class positioning should treat this litigation wave as a prompt to act.

• Review your target-date fund lineup with fresh eyes. Pull the current investment menu and identify every fund suite that has appeared in the 2026 filings. If your plan holds one of those suites, determine how long it has been in place, what percentage of plan assets it represents, and whether the investment committee has documented a rationale for retaining it. A target-date suite that has sat unchanged for a decade with no written record of ongoing evaluation is precisely the fact pattern these complaints exploit.
• Confirm you hold the lowest-cost share class available. The share-class theory is the easiest claim for plaintiffs to plead because the gap between retail and institutional expense ratios is visible on the face of the fund menu. For every fund in the lineup, not just the target-date options, verify that the plan holds the least expensive share class it qualifies for. Where a higher-cost class is retained, document the reason contemporaneously: revenue-sharing arrangements, recordkeeping credits, or other offsets that justify the differential. Undocumented exceptions become indefensible in discovery.
• Build and maintain a fiduciary file under privilege. Assemble investment committee minutes, benchmarking analyses, consultant reports, and watch-list decisions covering at least the past several years. The plaintiffs' theory depends on a long gap with no evidence of meaningful review. The file either supports you or it does not. Align your IPS with what the committee actually does. If it contains watch-list triggers, scoring thresholds, or automatic review timelines, confirm you have followed them. An IPS that the committee ignores becomes the plaintiff's roadmap. Courts applying the Ninth Circuit's Anderson framework are dismissing cases where plaintiffs cannot identify a meaningful comparator showing actual loss, so a well-documented process paired with a weak comparator on the other side is the strongest early-stage defense available.
• Evaluate your arbitration provision. Courts continue to strike boilerplate arbitration clauses that bar plan-wide relief under the effective vindication doctrine. A clause that delegates arbitrability to the arbitrator without a representative-action waiver may survive challenge. If your plan has an arbitration provision, have counsel review it now, not after a complaint tests it.
• Assess your venue exposure. The circuit split on pleading standards means your litigation risk varies by jurisdiction. The Ninth Circuit requires plaintiffs to identify a meaningful benchmark comparable in strategy, objectives, and risk profile. Other circuits have been less demanding where the complaint alleges prolonged underperformance and inadequate monitoring. Until Anderson v. Intel is decided, this is a jurisdictional variable that affects both exposure and litigation strategy.

The Bottom Line

These cases are designed for settlement, and plan sponsors who push back can win. The difference between a plan sponsor who settles under pressure and one who fights successfully comes down to preparation: a clean fiduciary file, a defensible share-class rationale, and an IPS that matches reality. You either have those things when the complaint lands, or you do not. Build them now.

For questions about how this litigation wave affects your plans or to discuss a proactive fiduciary review, please contact Angela Stockbridge.

DISCLAIMER: This summary is not legal advice and does not create any attorney-client relationship. This summary does not provide a definitive legal opinion for any factual situation. Before the firm can provide legal advice or opinion to any person or entity, the specific facts at issue must be reviewed by the firm. Before an attorney-client relationship is formed, the firm must have a signed engagement letter with a client setting forth the Firm’s scope and terms of representation. The information contained herein is based upon the law at the time of publication.