Philadelphia, September 9 (Kiran News) — A federal judge has approved Vanguard Group’s revised $25 million settlement in a lawsuit accusing the U.S. mutual fund giant of improperly burdening investors in its target-date funds with unexpected tax bills.
U.S. District Judge John Murphy in Philadelphia granted preliminary approval on Monday, calling the deal “sufficiently fair, reasonable, and adequate.” The approval comes after Murphy rejected a larger $40 million settlement in May, arguing that Vanguard could have offset that amount against its January 2025 $133 million settlement with the U.S. Securities and Exchange Commission (SEC) — leaving investors with little additional benefit once legal fees were deducted.
Settlement Details
The new $25 million payout will be in addition to the SEC-administered $133 million fair fund.
Investors’ lawyers said this ensures greater recovery, since the SEC settlement involved no legal fees.
A final settlement hearing is scheduled for January 6, 2026.
Background of the Case
The lawsuit stemmed from Vanguard’s December 2020 decision to reduce the minimum investment for lower-cost institutional share classes in its target-date funds from $100 million to $5 million.
This change prompted many investors to switch from higher-cost retail share classes to the cheaper institutional ones, forcing retail funds to sell assets to cover redemptions. As a result, remaining investors were hit with large taxable capital gains distributions.
Vanguard has denied wrongdoing but agreed to settle to resolve the litigation.
Vanguard Profile
Based in Valley Forge, Pennsylvania, Vanguard is the world’s second-largest asset manager with $11 trillion in assets under management as of July 31, 2025. Its target-date funds, which gradually shift from stocks to bonds and cash as investors approach retirement, are marketed as low-cost and tax-efficient options.
The case is In re Vanguard Chester Funds Litigation, U.S. District Court, Eastern District of Pennsylvania, No. 22-00955.
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