A 401(k) plan participant filed a class-action lawsuit against Quest Diagnostics Inc., Secaucus, N.J., claiming the company breached its fiduciary duties by offering an active lineup of target-date funds instead of index funds.
The lawsuit, filed in U.S. District Court in New Jersey, alleges the company and the plan's administrative and investment committees breached their fiduciary duties under the Employee Retirement Income Security Act of 1974 by offering Fidelity Investments' active lineup of target-date funds instead of a lower-cost lineup since at least December 2010.
According to the June 29 court filing, the plaintiff, Lawanda Lasha House Johnson, alleged on behalf of herself and a potential class that Quest failed even to consider other lineups, including Fidelity's own lower-cost Freedom Index Funds lineup of target-date funds, and "failed to act in the sole interest of plan participants," according to the filing.
Quest and the committees "breached their fiduciary duties by imprudently selecting and retaining the active suite" of Fidelity Freedom funds.
As of Dec. 31, 2018, the Profit Sharing Plan of Quest Diagnostics Inc. had $3.9 billion in assets, according to the company's most recent Form 5500 filing. As of that same date, the lineup of 13 Fidelity Freedom target-date funds had $1.6 billion in assets in the plan, according to the filing.
“We believe that the claims asserted in the complaint are very strong, and we look forward to litigating the claims on behalf of the plan and its participants,” said a spokesman for Shepherd, Finkelman, Miller & Shah, attorney for the plaintiffs, in an email.
Quest spokeswoman Kimberly B. Gorode said in an email the company cannot comment on pending litigation.