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U.S. Judge Dismisses Suit Against Fidelity, Deere

(Reuters)—Mutual fund company Fidelity Investments scored a legal victory this week when a federal judge threw out a lawsuit that alleged it had charged unreasonable fees and expenses to manage retirement savings.

Judge John Shabaz, sitting in the U.S. District Court in Wisconsin‘s Western District, dismissed a suit on Wednesday filed by workers at Deere & Co. The workers sued their employer and Fidelity, which acts as trustee and record keeper for the farm equipment maker’s 401(k) retirement savings plan.

A copy of the order was obtained by Reuters on Thursday. The plaintiffs, who sought class action status, alleged that Deere and Fidelity harmed them by charging “excessive and unreasonable fees and costs” and by failing to tell them about a revenue-sharing agreement.

The court ruled that neither Deere nor Fidelity had to tell the workers about these matters.

Filed in December, the lawsuit and about a dozen others like it shed new light on fees, an often overlooked part of the 401(k) retirement savings business.

“In this particular case, Fidelity has won the battle, but the war rages on,” said Gregory Ash, a partner specializing in employee benefits law at Spencer Fane. Fidelity spokesman Vin Loporchio said, “We believe it was the correct ruling.”

Jerome Schlichter, a partner at Schlichter, Bogard & Denton who represents the Deere workers and other plaintiffs in similar suits, said, “It is just one event in a process that will be ongoing and will take considerable time.”

Deere employees charged the company and Fidelity assessed plan participants expenses that “were, or are, unreasonable and/or not incurred solely for the benefit of the Plan participants.”

Arguing that administrative fees and expenses can weigh on participants’ returns, the plaintiffs said even small reductions can significantly reduce long-term savings.

 

The group also charged that Deere and Fidelity did not disclose that the mutual fund firm administering the plans shares some of the fees it charges with its customer.

“In the context of the disclosure of information on investment options, the additional information suggested by plaintiffs, including revenue sharing, is neither required by the regulations nor material to participant investors assessing the investment opportunity,” Judge Shabaz wrote in his ruling.

The ruling is a victory for Fidelity, a powerhouse in the investment management industry, at a time more and more Americans are relying on 401(k) savings plans to finance retirement. But the privately held firm faces other battles in two pending lawsuits that name it as a defendant.

As more Americans rely on 401(k) portfolios for retirement, the focus on fees has sharpened. Congress, the U.S. Department of Labor and the U.S. Securities and Exchange Commission are examining the issue.

The group also charged that Deere and Fidelity did not disclose that the mutual fund firm administering the plans shares some of the fees it charges with its customer.

“In the context of the disclosure of information on investment options, the additional information suggested by plaintiffs, including revenue sharing, is neither required by the regulations nor material to participant investors assessing the investment opportunity,” Judge Shabaz wrote in his ruling.

The ruling is a victory for Fidelity, a powerhouse in the investment management industry, at a time more and more Americans are relying on 401(k) savings plans to finance retirement. But the privately held firm faces other battles in two pending lawsuits that name it as a defendant.

As more Americans rely on 401(k) portfolios for retirement, the focus on fees has sharpened. Congress, the U.S. Department of Labor and the U.S. Securities and Exchange Commission are examining the issue.