A federal judge approved Vanguard Group’s $25 million settlement for improperly saddling investors in target-date funds with inflated tax bills. The initial $40 million settlement was rejected due to Vanguard’s ability to offset it from a related SEC settlement. The $25 million is in addition to a $133 million fair fund set up in the SEC case.

Target-date funds aim to reduce risk as investors age and be tax-efficient. Vanguard faced a lawsuit after lowering the minimum investment in lower-cost fund classes, causing investors to move from higher-cost retail classes. This led to retail funds selling assets, passing taxable capital gains to remaining investors.

Vanguard denied wrongdoing in settling the lawsuit. The firm, based in Pennsylvania, manages $11 trillion in assets. A final settlement approval hearing is scheduled for January 6, 2026. The case is In re Vanguard Chester Funds Litigation, U.S. District Court, Eastern District of Pennsylvania, No. 22-00955.

Read more at Yahoo Finance: Judge approves Vanguard’s revised settlement over mutual fund tax bills