Participants in a Shell Oil Co. 401(k) plan sued the company and plan fiduciaries alleging multiple violations of their fiduciary duties for selecting investment options, monitoring the plan, setting fees and dealing with the plan's record keeper.
The participants also sued the record keeper, Fidelity Investments, plus its parent company, FMR LLC, and several other Fidelity units, claiming that Fidelity also violated guidelines outlined in the Employee Income Retirement Security Act. They accused Fidelity of exploiting its role as a record keeper to cross-sell products to participants that weren't part of the Shell DC plan.
"Instead of using the plan's bargaining power to benefit participants and beneficiaries, Shell defendants allowed unreasonable expenses to be charged to participants for administration of the plan," said the complaint filed Jan. 24 in a U.S. District Court in Galveston, Texas.
"Even worse, Shell defendants allowed the Fidelity defendants to use plan participants' highly confidential data — including social security numbers, financial assets, investment choices and years of investment history — to aggressively market lucrative non-plan retail financial products and services," said the lawsuit, which seeks class-action status. The plaintiffs claim that more than 35,000 participants are affected.
Shell Oil didn't respond to a request for comment, but Fidelity assailed the complaint as "frivolous" and based on "falsehoods" in the case of Harmon et al. vs. Shell Oil Company et al.
"The claims against Fidelity are not only legally unsupported, they are based on outright falsehoods about the nature of Fidelity's business, and how Fidelity interacts with retirement plan sponsors and plan participants," Michael Aalto, Fidelity Investments' vice president for external communications, wrote in an email.
"Fidelity simply does not engage in the type of unauthorized solicitation of plan participants described in the complaint. We fully intend to mount a strong defense against this frivolous lawsuit," Mr. Aalto said.
The plaintiffs contended that the Shell 401(k) plan investment lineup contained more than 300 options "most of which are Fidelity's proprietary mutual funds" and that these funds were retained by Shell "without any ongoing monitoring ... to ensure that they remain prudent.
The participants also complained about the managed account service offered by Financial Engines, saying Shell fiduciaries failed to monitor fees and "caused plan participants to pay excessive managed account fees." Financial Engines is not a defendant.
The Shell Provident Fund, Houston, had assets of $10.1 billion as of Dec. 31, 2018, according to the latest Form 5500.