Fidelity Settlement Should be Wake-up Call for Fiduciaries

Fidelity Investments recently settled two lawsuits filed by its own employees for a total of $12 million.  The lawsuits, filed in March 2013, alleged that Fidelity selected only high-fee investment options from its own family of fund as well as adding funds with little or no track record.  As part of the settlement, Fidelity also agreed to provide a larger selection of funds to plan participants.

Being a fiduciary is an important responsibility and requires the individual to, among other things,

  • Act solely in the best interest of plan participants
  • Diversify plan investments, and
  • Pay only reasonable plan expenses

In assessing whether fees are reasonable, plan fiduciaries need to consider many factors, not simply selecting the lowest fee (where plan participants are paying less) or the highest fee (the participants must be getting better service for the higher fee). 

Fiduciaries need to carefully evaluate the fees and ensure that there is a clear understanding of the services that are being covered.  Sometimes services are “bundled” under one fee, but often fees are charged for individual services.  When comparing prices, it is important to compare like services as well.  Fiduciaries should also periodically review the fees they are paying to ensure that the fees continue to be reasonable and are covering only the services that are needed and used by the plan.

Fiduciaries and plan sponsors cannot afford to take their responsibility lightly.

© 2014 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

our thoughts on

array(1) { [0]=> string(2) "14" }
ERISA BY Brian Reitz
Bad Fiduciary. What’s it Going to Cost You?
Audit, ERISA BY Joshua Zimmerly
Benefit Plan Audit by Infomercial
Audit, ERISA BY Todd Lucas
Long-Awaited Employee Benefit Plan Audit Standard Final Balloted
Making Your Benefit Plan Audit Easier
ERISA BY Lindzee Nicholson
Mortality Scale 2018 Update
Revenue Procedure 2018-52 Released by IRS: VCP Modifications

Register to receive our weekly newsletter with our most recent columns and insights.

Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us

contact us

Map of Pittsburgh Office
Pittsburgh

One PPG Place, Suite 1700
Pittsburgh, PA 15222

contactsd@schneiderdowns.com
p:412.261.3644     f:412.261.4876

Map of Columbus Office
Columbus

65 East State Street, Suite 2000
Columbus, OH 43215

contactsd@schneiderdowns.com
p:614.621.4060     f:614.621.4062