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NYers To Receive Share of $106M Settlement Over Vanguard Retirement Fund Changes

Thousands of New Yorkers forced to pay higher taxes on their retirement savings are set to receive restitution after a $106 million, multi-state settlement was reached with Vanguard Group.

Cash money

Cash money

Photo Credit: Canva/John Guccione

The agreement, announced by New York Attorney General Letitia James on Friday, Jan. 17, comes after the investment advisory firm failed to inform investors of changes to its retirement funds. 

Those changes led to unexpected and significant capital gains tax bills for hundreds of thousands of investors, including over 15,000 in New York, James’ office said.

An investigation found that Vanguard reduced the minimum investment for its Institutional Target Date Retirement Funds (TRFs) from $100 million to $5 million in December 2020. This prompted many investors to switch from their Investor TRFs to Institutional TRFs, triggering massive sales of appreciated assets in the Investor TRFs.

As a result, retail investors faced steep capital gains taxes they were not warned about.

“New Yorkers deserve the peace of mind that comes with knowing their retirement savings are managed responsibly,” James said. “This settlement ensures accountability and provides restitution for investors left in the dark by Vanguard.”

Friday’s settlement was secured by a bipartisan coalition of 45 states and US territories, together with the Securities and Exchange Commission (SEC). Investors eligible for compensation will be contacted directly by the SEC.

Vanguard is one of the world’s largest investment advisors, managing approximately $7.9 trillion in retirement savings. 

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