Malvern-based Vanguard is set to settle a longstanding lawsuit related to allegations that the investment giant harmed taxable investors in its target-date funds, writes Jason Zweig for The Wall Street Journal. 

The terms of the settlement are still being negotiated. 

In 2021, Vanguard investors who had target-date funds that weren’t in a retirement plan got stuck with abnormally large tax bills. This was after institutional clients had switched to different accounts, which ended up creating capital gains for the small holders who stayed onboard. 

This exasperated many of the company’s loyal investors who had not been warned that those funds were not suitable for taxable accounts. 

“I think I’m screwed by Vanguard resulting in an enormous tax bill…. I feel that Vanguard guided me down this path which is frustrating,” said one complaint at the time. 

One investor pointed out that his $3.6 million holding of Vanguard’s Target Retirement 2035 fund resulted in state and federal tax bills of around $155,000. 

Vanguard agreed in mid-2022 with Massachusetts securities regulators to pay around $6 million to the state’s investors who have been hit with surprise tax bills. 

Read more about Vanguard settling its longstanding lawsuit in The Wall Street Journal. 

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