In Barchock v. CVS Health Corp., No. 17-1515 (1st Cir. 2018), the plaintiffs allege violations of the fiduciary duty of prudence under ERISA by the fiduciaries of an employer-sponsored 401(k) retirement plan. Specifically, the plaintiffs contend that a particular investment fund offered through the plan was invested too heavily in cash or cash-equivalents for the years at issue, and thus that the plan was imprudently managed and monitored. The district court dismissed the complaint for failure to state a claim under ERISA.
Upon reviewing the case, the First Circuit Court of Appeals (the “Court”) found that plaintiffs/plan participants failed to sufficiently allege violations of the fiduciary duty of prudence, under sections 3(21)(A) and 404(a)(1)(B) of ERISA, by the fund managers of their 401(k) plan, because merely contending that a stable value fund invested a relatively high proportion of its assets in cash or cash-equivalents, and that such an allocation was too conservative and departed radically from the logic and practices of such funds, did not suffice to state a claim of imprudence under ERISA. It was unreasonable to infer from solely the allegations that the fund manager “departed radically” from the cash-equivalent allocations by like funds that the manager was a “severe outlier” when it came to asset allocation decisions. Further, because the alleged harm was not cognizable under ERISA, there was also no basis for a claim against the employer or plan committee. Accordingly, the Court affirmed the district court’s dismissal of the complaint.