Fidelity is Sued Over Alleged Retirement Plan Mismanagement Again

Nearly years after settling two 401K lawsuits for $12 million, participants in Fidelity Investments’ retirement plan are once more suing the firm. The plaintiffs allege that self-dealing cost them money while allowing the financial firm and a number of its affiliated entities to turn a profit.

According to the complaint in Moitoso et al v. FMR LLC et al, Fidelity breached its fiduciary obligation to plan participants by including too many proprietary mutual funds in its $15B 401(K) plan. The plaintiffs claim that compared to 2014 and 2015, there was an increase in in-house funds in the 401(k) plan in 2016: 234 proprietary mutual funds with no non-proprietary funds in the plan, whatsoever.

Fidelity is accused of choosing proprietary investment products to promote its own interests even if they may not have been suitable for plan participants. As a result, contend plaintiffs, compared to the typical 401(k) plan, plan participants have lost $100M more annually because of poor performance and costly fund fees.

The lawsuit also alleges a failure by Fidelity to abide by its fiduciary obligation under the Employment Retirement Income Security Act (ERISA).

Another allegation brought against the financial firm includes the failure to properly use the 401(k() plan’s bargaining power to get lower fee costs for participants. The plaintiffs claim that as of the end of 2016, Fidelity’s 401(K) plan had “by far” the highest fees compared to other defined contribution plans holding over $5B in assets. Fidelity is also accused of unnecessarily raising plan costs by including every Fidelity fund in each asset class. The plan participants say that there was inadequate diversification in the retirement plan, resulting in more costly fund offerings than if there had been more diversified options.

The plaintiffs see the alleged self-dealing as “particularly inexcusable” considering that the firm’s parent company FMR had previously settled the two retirement plan lawsuits, Yeaw et al. v. FMR and Bilewicz, et al. v. FMR, in which the plaintiffs had also alleged self-dealing. Fidelity settled those cases for $12M but without admitting to wrongdoing.

The firm also disputes the allegations brought in this latest retirement plan lawsuit.

Retirement Losses Lawyers

At Shepherd Smith Edwards and Kantas, LLP, our skilled retirement losses lawyers work with investors that have sustained losses because of retirement plan mismanagement. Unfortunately, broker mismanagement can happen, resulting in unnecessary retirement and savings losses. We work with clients who have entrusted their money to a retirement plan, as well as individuals with self-direct Roth IRAs, IRAs and Keogh plans. Contact our investor law firm today.

Read the class action complaint against Fidelity (PDF)

Fidelity quietly settles employee lawsuits, InvestmentNews, August 12, 2014