A federal judge in Philadelphia has granted preliminary approval to Vanguard Group’s $25 million settlement resolving claims that its target-date fund investors were saddled with inflated tax bills. The case stems from the firm’s 2020 decision to slash the minimum investment for institutional share classes from $100 million to $5 million. That shift triggered investor migration out of higher-cost retail funds, leading to asset sales and taxable capital gains for those who remained. U.S. District Judge John Murphy described the revised settlement as “sufficiently fair, reasonable, and adequate,” after previously rejecting a $40 million proposal in May over concerns it could overlap with a separate SEC resolution.
Attorneys for investors emphasized that the new agreement adds to the $133 million fair fund already established under Vanguard’s SEC settlement. A final approval hearing is scheduled for January 6, 2026. Vanguard, which manages $11 trillion in assets, did not admit wrongdoing as part of the deal. In a separate matter, the company, alongside BlackRock and State Street, faces ongoing litigation in Texas federal court over alleged anti-competitive conduct in the coal industry, where most claims have been allowed to proceed.
