A federal judge in San Jose, Calif., has dismissed allegations of ERISA violations against NVIDIA Corp. and its 401(k) plan fiduciaries filed by participants in the plan.
The plaintiffs argued that the fiduciaries failed to offer the lowest-cost shares of mutual funds and didn't conduct an adequate review of plan options. They also accused the fiduciaries of failing to offer collective investment trusts when such options were available, in the case of Tobias et al vs. NVIDIA Corp. et al., which was filed in August 2020.
Although plan executives switched to a collective trust-based target-date series in 2018, the plaintiffs, who were seeking class-action status, said this option had been available in the marketplace since 2012, according to the complaint.
They also criticized fiduciaries for using revenue sharing to pay for record-keeping expenses, saying the fiduciaries should have issued an RFP to determine if record-keeping expenses were too high.
"Plaintiffs have failed to allege that the fees paid by the plan for record-keeping services were excessive in relation to the services actually provided to the plan," U.S. District Court Judge Lucy H. Koh wrote in her Sept. 13 ruling.
"Following other courts in this circuit that have considered similar allegations, the court finds that plaintiffs' allegations regarding the availability of lower cost share classes are ... insufficient to state a claim for breach of the duty of imprudence," the judge also wrote.
As for using collective investment trusts, Ms. Koh noted that defendants had made a change in the investment lineup and that defendants weren't required to offer collective investment trusts regardless of cost.
"Plaintiffs' allegations regarding (the benefits plan) committee defendants' failure to offer collective trust funds ... fail to state a claim for breach of the duty of imprudence," the judge wrote.
Ms. Koh also rejected the argument that fiduciaries should have chosen cheaper investment options, writing that the allegation was "insufficient to state a claim for breach of the duty of prudence."
The NVIDIA Corp. 401(k) Plan, Santa Clara, Calif., had $1.45 billion in assets as of Dec. 31, 2019, according the latest Form 5500.
