Not even a giant like Fidelity is immune.
The Boston-based financial powerhouse is under attack by its employees, again, who allege the company’s mismanagement of its 401k plan cost them hundreds of millions of dollars each year in lost returns.
A formal complaint was filed Oct. 10 with the U.S. District Court in Boston by three former participants on behalf of all “similarly situated persons.”
The suit, which targets the company, its parent organization FMR LLC, as well as all associated plan fiduciaries, alleges a violation of ERISA duties and seeks class-action status.
Participants claim the company’s plan charged excessive fees and profited at their expense by failing “to investigate nonproprietary options” or “monitor proprietary options that were included” in its investment menu.
“The Fiduciary Defendants have not managed the Plan with the care, skill, or diligence one would expect of a plan this size,” the complaint stated. “Instead, they have used the Plan as an opportunity to promote Fidelity’s mutual fund business at the expense of the Plan and its participants. The Fiduciary Defendants loaded the Plan exclusively with Fidelity-affiliated investments, without investigating whether Plan participants would have been better served by investments managed by unaffiliated companies.”
With nearly $15 billion in assets at the end of 2016, Fidelity’s 401k is among the 20 largest private-sector DC plans in the country.
“Among the 20 defined contribution plans with over $5 billion in assets for which necessary data was available, Fidelity’s plan performed the worst (almost three times worse than average), representing over $100 million per year in losses compared to the average plan,” the complaint went on to say.
It’s a bad look for America’s largest retirement plan recordkeeper, and one that’s all too familiar. The financial services firm settled a similar lawsuit in 2014, when it agreed to pay 50,000 employees $12 million.
Fidelity’s “conduct is particularly inexcusable given that they know better.” They have “all of the data and resident expertise necessary to build a plan in their participants’ best interests,” the plaintiffs argue.
“The Fiduciary Defendants’ mismanagement of the Plan and prioritization of Fidelity’s profits over the interests of the participants and beneficiaries of the Plan constitute a breach of the fiduciary duties of prudence and loyalty,” concluded the complaint.
Boston-based Block & Leviton, LLP and Minneapolis-based Nichols Kaster, PLLP, which has similar cases against American Century and Putnam Investments, are attorneys for plaintiffs.
Jessa Claeys is a writer, editor and graphic designer.
