IBM Hit With Class Suit Over Fund Performance in Worker 401(k)

International Business Machines Corp. cost its employees’ 401(k) plan more than $1.9 billion by offering poorly-performing funds managed by an in-house committee, four former workers said in a proposed class complaint.

The IBM plan’s target-date and target-risk funds consistently lagged meaningful benchmarks while paying fees to an investment manager affiliated with the technology company, the employees said in an Oct. 31 complaint. IBM evaluated the performance of these funds by favorably comparing them to “custom benchmarks,” but these are flawed comparisons that shouldn’t be relied upon, the employees alleged.

“Defendants administer these custom benchmarks, which are not used or ...