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Compliance October 23, 2025
Complaint Alleges Elanco US Failed to Monitor Its Adviser’s TDF Selection
The plaintiffs allege a breach of fiduciary duty, since the selected fund consistently underperformed its target.
Reported by James Van Bramer
A complaint filed on Tuesday by former Elanco US Inc. employees accuses the company’s 401(k) plan of breaching its fiduciary duties under Employee Retirement Income Security Act for holding onto underperforming target-date funds selected by the plan’s adviser.
In Phillips v. Elanco US Inc., the plaintiffs allege that animal care company Elanco breached its fiduciary duty to plan participants by uncritically relying on the plan’s investment adviser, Shepherd Financial Investment Advisory LLC, which improperly favored American Century Target Date Funds as plan investments.
The plaintiffs allege that in doing so, the plan fiduciaries failed to adhere to the plan’s investment policy regarding underperforming funds, neglected to complete timely suitability analyses for the American Century TDFs, and delayed the replacement of the funds despite their ongoing underperformance and losses in market share.
The decision to maintain the underperforming TDFs, which serve as the plan’s qualified default investment alternative, cost participants millions of dollars, the complaint alleges.
According to the complaint, from 2020 to 2023, between 66% and 73% of the plan’s assets—affecting a substantial number of the plan’s more than 3,700 participants—were invested in the American Century TDFs.
Additionally, the complaint cites an April 2022 investment policy statement that detailed specific guidelines for the selection of funds, including that each investment option shall be reviewed with consideration of factors such as significant loss or growth of assets under management. It also contains a comparison indicating that the TDFs failed to meet the annualized returns of the S&P 500 Index from 2019 to 2024.
According to the complaint, the plaintiffs seek to “make good” on the plan’s losses resulting from the alleged fiduciary breaches and seek reforms to the plan to prevent further alleged wrongdoing.
The Elanco US Inc. 401(k) Plan had 3,626 plan participants with more than $676 million in assets at the end of 2024, according to its most recent Form 5500 filing.
Walcheske & Luzi LLC represents the plaintiffs, while the name of the defendants’ counsel was not available in court records.
Elanco did not return a request for comment.