Fidelity Settles 401(k) lawsuits with Employees

Last Updated: October 13, 2014

In the past, we’ve talked about the roles and responsibilities of being a fiduciary. Fiduciaries to retirement plans have the responsibility to monitor the plan’s service providers, to make sure agreements are reasonable and to confirm that services being provided are necessary. Recently, Fidelity Investments, the nation’s largest retirement plan provider, was sued by 50,000 current and past employees.
The suit claimed: 1. There were too many Fidelity funds on the retirement plan’s investment lineup, creating an inherent conflict of interest 2. The plan’s investment lineup contained too many actively managed funds (85% of the plan’s funds were actively managed, and therefore more expensive than the passively-managed alternatives) 3. Overall, the fees were too high Although Fidelity did not admit any blame, they did decide to settle. The settlement states that Fidelity must: 1. Offer more non-Fidelity funds on plan’s investment lineup 2. Have a bigger mix of index funds 3. Must increase auto-enrollment from 3% to 7% (Fidelity matches 100% up to 7%) What can fiduciaries glean from this case? It’s a reminder that as a fiduciary, you have a responsibility to continually monitor fees and services as well as the plan’s investments. As a fiduciary to a retirement plan, you should consider whether or not your plan offers a diversified lineup and take a closer look at the plan’s auto-enrollment provision. Although the Fidelity suit ended in a settlement and not a court decision, fiduciaries should be having conversations about the responsibilities of the plan to its participants. PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.


Pension Consultants, Inc.



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