Fidelity Investments is settling a lawsuit involving its own 401(k) plan for $28.5 million, according to court records filed Thursday.
The settlement resolves a class-action case brought in 2018 that alleged the firm breached its fiduciary responsibility to plan participants by including its own products on the plan menu. The company had been similarly targeted in a prior lawsuit that it settled in 2014 for $12 million. As part of that, the company agreed to rebate revenue sharing from mutual funds on the plan menu back to the plan.
That measure was criticized by plaintiffs in the more recent case as “an accounting gimmick,” as the company reportedly adjusted its discretionary profit-sharing contributions to participants based on the amounts that had been returned to their accounts, according to court records.
Earlier this year, the court found that Fidelity was not liable for some of the claims lobbed against the firm, though claims that the firm failed to monitor plan fiduciaries could proceed.
The company agreed to settle the case last month, however, the amount of the settlement was not disclosed until Thursday.
“Fidelity believes that this lawsuit lacked merit and that its management of the plan complies fully with the Employee Retirement Income Security Act,” a company spokesperson wrote in an email. “We feel we offer a generous 401(k) plan that provides high value and offers superior levels of customer service.”
The company opted to settle in order to avoid further costs and distraction associated with the case, the spokesperson said.
The firm “anticipates that approximately 80% of this settlement payment (after payment of attorneys’ fees) will go into the Fidelity Plan,” the statement read. “Fidelity determined that it makes sense to settle the lawsuit at this time.”
Law firms representing the plaintiffs — Nichols Kaster and Block & Leviton — had not filed for attorneys’ fees at the time of publication.
Along with the monetary aspect of the settlement, the plan’s fiduciaries agreed to more closely monitor record keeping fees and investment options, according to the agreement.
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