On the heels of several significant Employee Retirement Income Security Act (ERISA) class settlements in 2024, law firm Sanford Heisler Sharp McKnight has filed a class-action lawsuit against Discount Tire’s 401(k) plan, which has over $1 billion in assets, alleging that the plan’s target-date funds from American Century Investments were “one of the worst-performing investment suites ... in the plan for over 15 years” and should have been replaced. Cory McGeathy, a former participant in the plan, filed the case on behalf of approximately 16,000 participants. The Reinalt-Thomas Corporation, d/b/a Discount Tire; The Reinalt-Thomas Board of Directors; and Empower Trust Company are also named in the lawsuit.

Sanford Heisler filed the complaint on April 30 in the U.S. District Court for the District of Arizona, alleging that Discount Tire and Empower Trust Company breached their basic fiduciary duties under ERISA by failing to remove from the plan a family of nine target-date retirement funds managed by American Century Investment Management. Nearly half the value of the Discount Tire plan—more than $500 million in plan assets—is invested in the American Century funds, which have been in the plan since 2010. By December 2019, the cumulative investment performance of each of the nine target date funds had lagged the plan’s investment benchmark—Standard & Poor’s Target Retirement Date Index—for a decade. Each of the nine funds also underperformed other target-date retirement fund alternatives over the same period.