A U.S. District Court judge in Newark, N.J., rejected a petition by Quest Diagnostics Inc. to dismiss allegations of ERISA violations filed by participants in a multiple employer 401(k) plan.
The complaint focused on the plan's use of a target-date series, which participants alleged charged excessive fees for poor performance. Participants also maintained that the plan fiduciaries should have offered an index-based rather than actively managed target-date series.
"Taking the requisite holistic view of plaintiff's allegations regarding deficient plan management, dismissal at this early stage based on the consolidated complaint's discussion of the index suite would be inappropriate," U.S. District Court judge Susan D. Wigenton said Tuesday.
The case, In Re Quest Diagnostics Inc. ERISA Litigation, is a consolidation of two lawsuits filed last year, alleging essentially the same ERISA violations.
"Plaintiffs allege that defendants overpaid management fees, the plan failed to use its size and presumed negotiating power to reduce costs, and Fidelity was incentivized to promote its own high-fee investment products," the judge said. Fidelity Investments is the record keeper, but it is not a defendant.
"Together, the consolidated complaint's allegations and cost comparisons are sufficient to state a claim," the judge said.
As to the participants' claim against fiduciaries for breach of trust, the judge said: "Plaintiffs sufficiently state a claim the defendants knew or should have known about the nonfeasance or malfeasance of others."
As of Dec. 31, the Profit Sharing Plan of Quest Diagnostics Inc., Secaucus, N.J., $4.6 billion in assets as of Dec. 31, 2019, according to the company's latest Form 5500.
