Fidelity sued by Delta 401(k) participants over alleged fiduciary breach

Claim alleges Fidelity 'wanted a piece of the action' when Financial Engines was hired to provide plan advice

May 31, 2016 @ 10:57 am

By Robert Steyer

Participants in a Delta Air Lines Inc. 401(k) plan have sued units of Fidelity Investments, alleging fiduciary breaches in Fidelity's record-keeping role.

The case, Fleming et al. vs. Fidelity Management Trust Co. et al., was filed May 20 in the U.S. District Court in Boston. Delta isn't a party to the lawsuit.

The participants, who are seeking class-action status, alleged that Fidelity “wanted a piece of the action” when Financial Engines was hired to provide investment advice for the Delta Family-Care Savings Plan, according to the complaint. The plan had $7.84 billion in assets as of Dec. 31, 2014, according to its latest Form 5500.

“In order to be included as the investment advice service provider on Fidelity's (record-keeping) platform, Financial Engines agreed to pay — and is paying — Fidelity a significant percentage of the fees it collects from 401(k) plan investors,” the complaint alleged.

Financial Engines isn't a party to the lawsuit.

(Related: Class-action surge ups the ante for 401(k) advice)

This arrangement “inflated the price of investment advice services that are critical to the successful management of workers' retirement savings and violates (Fidelity's) fiduciary responsibility,” the complaint said.

Participants also alleged that Fidelity's management of a self-directed brokerage account, called BrokerageLink, “acquires share classes that have higher expense ratios,” the complaint said. These share classes “will pay Fidelity significant amounts in revenue-sharing payments, effectively using the plans' assets for its own benefit and its own account.”

Vincent Loporchio, a Fidelity spokesman, wrote in an e-mail Friday that “the allegations in this complaint are without merit, and we intend to defend against them vigorously.”

Robert Steyer is a reporter at sister publication Pensions & Investments.


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