Former participants in the Fidelity Investments 401(k) plan have sued the parent company FMR LLC, Fidelity affiliates and plan fiduciaries alleging they "failed to manage the plan in a prudent and loyal manner" in violating of ERISA guidelines.
"The complete absence of non-proprietary options in the plan gives rise to an inference that the fiduciary defendants failed to investigate whether non-proprietary alternatives were available that would have better met the needs of plan participants due to lower fees and/or superior investment management services," said the complaint filed Oct. 10 in federal District Court in Boston.
"Fidelity strongly disputes the allegations in this complaint," Fidelity spokeswoman Sophie Launay said in an email Friday. "We provide an excellent retirement plan to our employees, and we plan to vigorously defend against this lawsuit."
The participants, who are seeking class-action status, argued that a "prudent fiduciary" would have limited the plan's investment menu instead of offering "almost every Fidelity mutual fund in existence."
Offering so many Fidelity options without exploring other choices represented a "failure to engage in a meaningful process of monitoring the plan's investment options to ensure that they remained prudent," said the complaint in Moitoso et al. vs. FMR LLC et al.
The participants also alleged that the Fidelity plan charged excessive fees. "By indiscriminately including every Fidelity fund within every asset class, the fiduciary defendants needlessly increased average expenses," the complaint said, adding that the defendants "failed to investigate the availability of lower-cost marketplace alternatives."
Fidelity Retirement Savings Plan, Boston, had $14.73 billion in assets as of Dec. 31, 2016, according to the latest Form 5500.