ABB Inc., Cary, N.C., hired Bank of America Merrill Lynch as the record keeper for two 401(k) plans, said Melissa London, a spokeswoman for ABB.
The change in record keepers is related to a long-running class-action lawsuit involving participants and former participants of the ABB plans with aggregate assets of about $1.75 billion, who allege several fiduciary breaches by ABB and Fidelity in the administration of the plans.
As part of a decision on March 31, 2012, a federal district court judge in Jefferson City, Mo., ordered ABB to conduct an RFP for a record keeper within 18 months. Fidelity was permitted to rebid. For investments in the plans' menus, “ABB shall choose the share class of investments that has the lowest expense ratio,” the court said.
The judge's RFP and investment lineup comments were part of a broad ruling that said:
- ABB had breached its fiduciary duty in the management of the 401(k) plans, assessing a penalty of $13.4 million against the company for, among other things, failing to monitor record-keeping costs;
- ABB breached its fiduciary duty in mapping Vanguard's Wellington Fund to the Fidelity Freedom Fund target-dateseries, saying ABB should pay $21.8 million — the loss that the court said was due to the mapping; and
- Fidelity had breached its fiduciary duty in the management of float income, which is interest earned when contributions and disbursements are held temporarily in overnight or disbursement accounts. The court assessed a $1.7 million judgment vs. Fidelity.
Fidelity was only a defendant in the float income ruling.
However, on March 19, the 8th U.S. Circuit Court of Appeals, St. Louis, reversed the U.S. District Court's float income ruling vs. Fidelity. The appeals court upheld the $13.4 fiduciary breach ruling vs. ABB. It also vacated the $21.8 million investment-mapping ruling, sending it back to the lower court “for further consideration.”