Fidelity Investments has agreed to pay $28.5 million and change its recordkeeping practices on its own 401k in response to a class-action suit brought by former employees with money still in the plan.
Under the terms of the proposed settlement, Fidelity insurers will pay the settlement amount for “failure to monitor recordkeeping fees (which partially overlapped with alleged damages associated with the failure to monitor certain Fidelity funds).”
Moreover, the settlement also provides for one or more plan fiduciaries to monitor plan recordkeeping fees and plan investment options.
“These changes directly address the Court’s finding in its Case Stated Order that Fidelity “fail[ed] to monitor proprietary funds other than the two DIAs, and … fail[ed] to monitor recordkeeping expenses.”
The suit was originally filed on October 10, 2018, related to its management of the Fidelity Retirement Savings Plan.
Allegations
It alleged that the plan’s fiduciaries violated the Employee Retirement Income Security Act (ERISA) by managing the plan in a manner that favored current employees at the expense of former employees, and by promoting Fidelity’s proprietary investment products and company business interests over the interests of class members, according to Nichols Kaster, one of two law firms representing employees.
On March 27, the court ruled in favor of the employees, finding that Fidelity breached its fiduciary duties by failing to monitor the proprietary mutual funds included in Fidelity’s 401k plan investment menu and failing to monitor the plan’s recordkeeping expenses.
Plaintiffs were Kevin Moitoso, Tim Lewis, Mary Lee Torline, and Sheryl Arndt, individually and as representatives of a class of similarly situated persons, and on behalf of the Fidelity Retirement Savings Plan.
Defendants were FMR LLC, the FMR LLC Funded Benefits Investment Committee, the FMR LLC Retirement Committee, Fidelity Management & Research Company, FMR Co., Inc., and Fidelity Investments Institutional Operations Company, Inc., Defendants.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
