Fidelity faces lawsuit over 401(k) plans

Working people across the country rely on their 401(k) and other employee-sponsored retirement plans for at least part of the savings that they’ll need to after they retire. The Employee Retirement Income Security Act of 1974 was signed into law in part to regulate how these plans are managed.

ERISA regulations help protect employee funds that are in these plans. When employees believe that their plans have not been properly managed, they can and sometimes do take legal action.

Fidelity Investments finds itself the defendant in yet another suit involving its 401(k) plans. The plaintiffs in the class action suit are alleging that a fiduciary and trustee intentionally mismanaged one of its stable value funds. The suit says that those responsible for the fund employed a conservative strategy that resulted in high fees and low returns for investors.

Further, the suit alleges that Fidelity took steps to cover up the fund’s poor performance by using the wrong benchmark in its communications with plan participants and sponsors. The actions regarding the fund, which was available through Barnes and Noble Inc., allegedly occurred between 2009 and 2015. The outcome of this case could impact other investors in similar situations.

Most people aren’t investment experts. They rely, understandably, on their plan fiduciaries and trustees to help ensure that their money is being invested wisely and that the information that they are provided about the performance of their investments is accurate. However, when those tasked with handling these investments for employees don’t fulfill their responsibilities under ERISA, they can and should be held accountable for their actions.

Source: Investment News, “Fidelity targeted in another ERISA class-action suit,” Greg Iacurci, Dec. 17, 2015