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HP, United Airlines employees sue companies, Fidelity over float income management

Lawsuit follows dismissal of similar claims vs. Fidelity by 7 other plans

HP Inc. and United Airlines Inc. employees are suing the companies and Fidelity for alleged fiduciary breaches relating to Fidelity's management of float income in the companies' 401(k) plans.

Float income is money earned from interest-bearing accounts used temporarily by 401(k) plans before plan assets are disbursed when participants move assets among investment options.

According to the lawsuit filed last week in U.S. District Court in San Jose, Calif., “all of the cash generated as a result of plan operations — employer and employee contributions, loan repayments and sales of securities owned by a plan — should belong to the plan and be held in trust by or for the benefit of the plan.”

However, Fidelity, the plans' trustee and record keeper, diverted that cash for its “exclusive use and control for which the plans received no compensation or discernable benefit,” the lawsuit argues.

The lawsuit adds that HP and United Airlines violated their fiduciary duties by failing to catch Fidelity's alleged misconduct.

Last month, a Boston federal appeals court upheld a lower court's dismissal of similar complaints against Fidelity by participants in seven other 401(k) plans. In another suit, Tussey vs. ABB Inc., Fidelity prevailed against similar claims.

The Hewlett-Packard 401(k) Plan had $17.8 billion in assets as of Dec. 31, 2014, and the United Airlines Ground Employee 401(k) Plan had $2.2 billion in assets as of Dec. 31, 2015, according to their most recent Form 5500s.

Fidelity believes last week's lawsuit is “without merit” and intends to “defend against it vigorously,” said a Fidelity spokesman in an e-mail. “We believe that the practice at issue in this lawsuit is consistent with the law and fair to all parties. Fidelity has prevailed in two similar cases, and in both cases the courts rejected these same claims as unfounded. This new attempt to assert the same claims is equally baseless.”

Spokesmen HP and United Airlines could not immediately be reached for comment.