Plaintiffs Appeal Federal Court’s Ruling Dismissing Their 401(K) Lawsuit Against Fidelity

A notice of appeal was submitted with the 1st U.S. Circuit Court of Appeals by plaintiffs seeking to overturn a ruling by a federal district court dismissing their 401(K) case against Fidelity Investments. The case is In Re Fidelity ERISA Float Litigation.

According to the plaintiffs, who are participants in a number of defined contribution plans, as record keeper for several of the plan, the financial firm breached its fiduciary duty when managing the plans’ float income. This is the money made from interest-bearing accounts that 401k) plans use temporarily before plan assets are disbursed and participants move their funds among different investment choices.

The plan participants believe that Fidelity used the float income to cover administrative and record-keeping costs, which was not part of their agreement with the firm in terms of the fees they were supposed to pay it. However, U.S. District Judge Denise Casper dismissed their complaint last month, finding that the plaintiffs did not plausibly allege that “float income is a plan asset.” Casper noted that she did not consider Fidelity an ERISA fiduciary in relation to float. Now, however, the plaintiffs’ lawyers are disagreeing with Casper’s ruling.

The ERISA case consolidated four lawsuits filed against Fidelity by 401(k) plan participants. Bank of America (BAC) is one of the plaintiffs.

The appeal comes just weeks after Ameriprise Financial ag (AMP) consented to pay $27.5M to resolve a 401(k) lawsuit accusing it of breaking its fiduciary duty to 24,000 ex- and current employees who participate in the company’s retirement savings plans.

The plaintiffs accused that firm of failing to make sure the administrative services fees charged were reasonable. They questioned the way Ameriprise used investment options that were managed by a subsidiary. The firm denies the allegations.

However it did consent to place the record-keeping functions of its plan out for bidding and to pay a per-participant or flat fee for these services. It also consented to specific fee disclosures and agreed to find the lowest-priced investment choices moving forward.
Another suit on 401k fees is dismissed, The Wall Street Journal, March 26, 2015

More Blog Posts:
FINRA Fines Fidelity $350K for Overcharging More than 20,000 Clients $2.4M, Stockbroker Fraud Blog, January 20, 2015

Fidelity Investments Settles Class Action Lawsuits Over 401(K) Plan for $12 million, Stockbroker Fraud Blog, September 5, 2014