Fidelity hit with another 401(k) lawsuit
By Dan Berman
Fidelity Investments is facing a new lawsuit by its employees claiming breach of fiduciary duty in managing the company’s in-house 401(k) plan.
The class action suit, filed this week in U.S. District Court in Massachusetts, alleges the Boston-based company did not seek to recapture excess revenue-sharing money held to cover recordkeeping expenses.
A lawsuit filed last March made similar claims, which Fidelity has denied. That suit caused industry observers to say asset managers should make sure they are not breaking any of their fiduciary duties.
Such lawsuits have become more common over the last few years, with more than 30 filed against plan sponsors.
The new suit claims the recordkeeping fees paid by the plan to Fidelity’s own mutual fund lineup far exceeded what was reasonable. Dating back to 2007, the suit says the fees were excessive because Fidelity did not have an arm’s length relationship with its recordkeepers. Many large plans, the suit said, negotiate hard fees.
For instance, the suit says, if a reasonable recordkeeping fee equaled $10 per participant, any amount paid above that would be returned. Fidelity’s plan has about 55,000 participants and $8 billion in assets. The lawsuit says fees paid should have equaled $550,000 per year. In fact, the plan paid $15 million for each year.
The suit also claims Fidelity did not disclose the fees to plan participants.
A Fidelity spokesman, reached by email, issued a statement.
“While it’s not appropriate for us to comment on pending litigation, it is well known in the industry that Fidelity offers a very attractive benefits package including a 401(k) plan that matches eligible employee contributions to the plan, dollar for dollar, up to 7 percent of each eligible participant’s compensation – a level of match enjoyed by only approximately 2 percent of 401(k) plan participants nationwide,” said Vincent Loporchio, a Fidelity spokesman.
Originally published on BenefitsPro.com