Oracle to pay $12 million to settle 401(k) lawsuit

Oracle Corp. is settling a long-running 401(k) lawsuit for $12 million, according to court records filed last Thursday.

The settlement comes just before the trial was scheduled to begin. According to the agreement, the deal helps both parties avoid substantial risks that they faced in the process of reaching a court decision.

The lawsuit, which was filed in January 2016, alleged that Oracle, as sponsor to the 401(k) plan, breached its fiduciary duty to plan participants, by including at least three investment options that underperformed their benchmarks, and allegedly charged excessive fees.

Those funds also paid revenue sharing to the plan record keeper, Fidelity, that was “far beyond a reasonable rate for the services provided,” according to the complaint.

Those investment options included the Artisan Small Cap Value Fund, TCM Small-Mid Cap Growth Fund and PIMCO Inflation Response Multi-Asset Fund.

The settlement class includes all participants or beneficiaries of the plan between Jan. 1, 2009, and Dec. 31, 2019, according to the court motion.

In addition to the monetary component of the settlement, the agreement compels Oracle to instruct Fidelity not to cross-sell any products or services to its plan participants for three years. That includes soliciting the 401(k) participants for individual retirement accounts, managed account services outside of the plan, insurance products, wealth management services and investments, according to court records. That guideline would also apply to a different record keeper if Oracle hired a new one during the three-year period.

That detail “provides substantial value to current and future participants by ensuring that the plan’s record keeper does not improperly benefit from the sale of retail financial products and services to the detriment of plan participants,” the parties wrote in a notice to the judge.

Fidelity is not a named defendant in the litigation. “Fidelity simply does not engage in the type of unauthorized solicitation of plan participants described in the complaint," a Fidelity spokesman wrote in an email.   

The record keeper has been sued in separate cases over allegedly “secret payments” it receives from mutual fund sponsors whose products are included in its plans the company serves. Last month, a case brought by participants in T-Mobile’s plan was dismissed in federal court. Lawyers representing plaintiffs have said they will appeal that decision.

The Oracle 401(k) plan, which was established in 1986, had about $14.3 billion in assets among nearly 80,000 participants at the end of 2018, according to Department of Labor data aggregated by BrightScope.

The settlement includes a maximum payout of nearly $4.5 million for plaintiff law firm Schlichter Bogard & Denton. That law firm is all but synonymous with retirement plan litigation, having brought cases against dozens of 401(k) and 403(b) plan sponsors. The firm has reached settlements or won awards totaling more than $1.5 billion in such litigation, including a $62 million settlement with Lockheed Martin, a $55 million settlement with ABB and a $57 million settlement with Boeing, according to the law firm.