MIT settles class-action suit that snared Fidelity's Abigail Johnson

MIT settles class-action suit that snared Fidelity's Abigail Johnson
Pending settlement in lawsuit could alter Fidelity's 20-year-old record-keeping arrangement with the university.
SEP 13, 2019
The Massachusetts Institute of Technology has reached a settlement agreement in a class-action lawsuit that alleged a quid pro quo arrangement with Fidelity Investments related to the university's 401(k) program. The agreement comes just days before the trial was slated to begin on Monday. [Recommended video: Retirement advisers can boost business by focusing on participants in these ways] Details of the settlement agreement will be made public within 45 days, according to Jerome Schlichter, the attorney representing the class of more than 20,000 current and retired MIT employees. "The employees and retirees of MIT will not only receive compensation, but the retirement plan will be changed and reformed," Mr. Schlichter said. Fidelity was not named as a party in the lawsuit, but the Boston-based asset management giant did take legal action to prevent Fidelity chairman and chief executive Abigail Johnson from having to testify during the trial. Ms. Johnson, a "life member" of MIT's board of trustees, was linked to the lawsuit through Fidelity's 20-year-old 401(k) plan record-keeping agreement with the university. Also, although MIT's retirement plan menu currently includes just one Fidelity fund, for the five years ended in 2015, the menu of options included every Fidelity mutual fund. A Fidelity spokesman declined to comment for this story. The lawsuit alleged that MIT secured Fidelity's record-keeping services and used its mutual funds against the advice of consultants in exchange for donations from Fidelity to the university. According to the lawsuit, when MIT rejected the idea of conducting competitive bidding in 2015, the dean of the university's Sloan School of Management wrote in an email: "But if we are not switching to Vanguard or TIAA-CREF, I am going to expect something big and good coming to MIT from the Johnson family." Shortly thereafter, Fidelity donated $5 million to MIT, representing the school's largest donation in more than 15 years. Mr. Schlichter also claimed that MIT had received more than $23 million in donations from Fidelity since the record-keeping relationship began. In response to a request for comment, an MIT spokeswoman emailed a link to a statement from university provost Martin Schmidt, which justified the settlement as removing a "distraction" and defended MIT's management of its 401(k) plan. The statement reads in part: "Over the last three years, MIT has vigorously defended the actions of the faculty and staff who have devoted their time and expertise to serve as fiduciaries of the plan. We believe that the evidence at trial would have demonstrated that the Institute carefully and prudently managed the 401(k) plan in a manner consistent with the best interests of plan participants and beneficiaries, drawing on the advice of experts in the field and striving to meet the needs and wishes of the MIT community."

Latest News

Cerulli: Advisors struggle to turn 401(k) savers into wealth clients
Cerulli: Advisors struggle to turn 401(k) savers into wealth clients

Just over 10% of advisors' wealth clients come from defined contribution plans, as capacity, data and technology gaps block the bridge to wealth

Alto to buy Forge Trust from Schwab in self-directed IRA push
Alto to buy Forge Trust from Schwab in self-directed IRA push

Deal creates a $20B-plus custody platform for private market investing in IRAs, months after Schwab closed its Forge Global purchase

Wall Street bonanza! The Street on track to hit a record $90 billion in profits: Report
Wall Street bonanza! The Street on track to hit a record $90 billion in profits: Report

Despite the good times, advisors should tread carefully, said one veteran industry executive.

Aspen Standard Wealth buys $1B Louisiana RIA Cullen Investment Group
Aspen Standard Wealth buys $1B Louisiana RIA Cullen Investment Group

Cullen marks the fourth firm the New York-based RIA aggregator has bought in 2026 as deal volume heads for a record year.

Strategy before technology: Establishing the foundation for measurable AI value
Strategy before technology: Establishing the foundation for measurable AI value

The quality of AI ROI measurement depends on pre-deployment decisions around business outcomes, leadership alignment, and establishing trusted information, among other factors.

SPONSORED Built on insurance experience to deliver on long-term promises

Knighthead Life entered the market with a competitive MYGA. A strong launch earned advisor confidence and paved the way for FIAs.

SPONSORED In the Age of AI, Trust Becomes the Advisor's Greatest Asset

As AI makes financial information more accessible than ever, Lana Hock explains why human judgment, trust, and empathy remain the qualities clients value most in a financial advisor