Bloomberg 401(k) Lawsuit Highlights Need for Rigorous Fund Monitoring

Fiduciaries face increasing scrutiny over 401(k) fund oversight, requiring a disciplined process to navigate underperformance

Apr. 8, 2026 at 1:55pm

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A recent $70 million ERISA lawsuit against Bloomberg's 401(k) plan alleges the company failed to remove two underperforming funds for years, resulting in significant losses for participants. This case reflects a broader trend of heightened scrutiny over fiduciary duty and fund monitoring in retirement plans. Ongoing oversight requires a nuanced, rigorous process to evaluate underperformance, as simply removing funds is often not a straightforward solution. Working with an independent third-party can provide objectivity and support to navigate these complex decisions.

Why it matters

The Bloomberg lawsuit and similar cases highlight the growing legal risks for retirement plan fiduciaries who do not maintain a disciplined fund monitoring process. Underperformance can be challenging to assess, and removing funds prematurely can lead to further disruption. Consistent oversight and adherence to a structured approach are essential to fulfilling fiduciary responsibilities and helping ensure positive outcomes for plan participants.

The details

Ongoing fund monitoring is a complex, resource-intensive process that goes beyond simply tracking returns against benchmarks. Factors like a fund's underlying strategy, time horizon, and market environment must be considered to determine if underperformance is persistent and unexplainable. Generally, Morningstar recommends placing funds on a watch list after 12 months of unusual lagging performance, then conducting a thorough review before deciding whether to remove the fund. This measured approach helps avoid knee-jerk reactions while still taking appropriate action to protect participant interests.

  • The Bloomberg 401(k) lawsuit was filed in January 2026.
  • The Harbor Capital Appreciation Fund allegedly underperformed its benchmark for 16 years.
  • The Parnassus Core Equity fund allegedly underperformed for a decade.

The players

Bloomberg

A New York-based company that is facing a $70 million ERISA class action lawsuit over alleged failures to remove underperforming funds from its 401(k) plan.

Harbor Capital Appreciation Fund

A fund that allegedly lagged its benchmark for 16 years, resulting in significant losses for Bloomberg 401(k) participants.

Parnassus Core Equity Fund

A fund that allegedly underperformed for a decade, also contributing to losses for Bloomberg 401(k) participants.

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What they’re saying

“The Bloomberg lawsuit and others are a stark reminder that monitoring and prudence aren't optional—they're foundational.”

— Brian McCarthy, Vice President of Go-to-Market Strategy at Morningstar

“Ongoing monitoring is a perpetual, resource-intensive, and high-stakes process. And getting it wrong can significantly impede a participant's ability to achieve a successful retirement.”

— Brian McCarthy, Vice President of Go-to-Market Strategy at Morningstar

What’s next

The judge in the Bloomberg case will decide in the coming months whether to allow the $70 million ERISA lawsuit to proceed.

The takeaway

This case highlights the growing legal risks for retirement plan fiduciaries who do not maintain a rigorous, disciplined process for monitoring fund performance. Advisors must establish clear criteria for when to place funds on a watch list and when to take action, while also leveraging independent third-party expertise to navigate complex decisions and emotionally charged conversations with plan sponsors.