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Fidelity Settles Lawsuit with Own Employees Over 401(k) ERISA Allegations

"[The] settlement agreement provides for $12 million to be paid to the class and for .. affirmative relief [including]: [1] The Plan will make available a wide selection of both Fidelity and non-Fidelity mutual funds.... [2] Fidelity is increasing auto-enrollment for eligible employees from 3% to 7% of eligible compensation, and will default current participants who are currently deferring below 7% to 7% of eligible compensation. Fidelity will apply its match to those increased contributions. [3] The Plan shall provide that revenue sharing attributable to non-Fidelity mutual funds shall be credited to participants in the same way as revenue attributable to Fidelity mutual funds and collective trusts pursuant to the 8th amendment to the 2005 restatement of the Plan is credited to participants."

Fidelity Files Motion to Dismiss Lawsuit Over In-House Plan

"Fidelity makes the following non-exhaustive list of legal and factual arguments: [1] Plaintiff lacks constitutional standing to bring her claims because she was only invested in a small sub-set of a much larger group of Fidelity funds in the plan.... [2] Fidelity offered free advice to all participants to help them pick from the plan's lineup. [3] Between 2007 and 2011, Fidelity contributed $2.1 billion in employer contributions, which purportedly amounts to 10 times the alleged amount of excessive fees paid back to Fidelity from the plan's investments. [4] Prohibited Transaction Exemption 77-3 expressly allows a company like Fidelity to use its own mutual funds."

Schwab Joins Fidelity in Credential-Sharing Crackdown

"Schwab has asked clients to reset their login credentials, a request coming shortly after Fidelity took similar action to limit third-party vendor access to 401(k) and other customer accounts. Like Fidelity, Schwab has cited protecting client data in their attempts to limit credential sharing of a client's username and password. Third party fintech firms such as Pontera have adopted credential-sharing technology to connect selected outside advisors with held-away assets such as 401(k) accounts from retirement plan providers."

Fidelity, Pontera Clash Over 401(k) Access and Data Security

"The use of actual customer credentials to access accounts is a clear sticking point for Fidelity, because those credentials provide access to a user's full account experience -- not just their 401(k). Plan participant credentials held by third parties are not protected by a recordkeeper's security measures, which can put participant data and personal information at risk."

Pontera CEO Heats Up Year-Long Battle Over Fidelity Ban on Credential Sharing

"Pontera CEO Yoav Zurel ratcheted up his year-long battle with Fidelity Investiments, scolding the No. 1 401(k) recordkeeper in an 'open letter' for refusing to allow third-party credential sharing.... Pontera's business model depends on password sharing to link RIAs and their Fidelity 401(k) clients through a 'holistic portfolio' on its platform. "

Fidelity Increases Data Security by Limiting Credential Sharing

"Some third-party fintech firms use credential sharing to access, manage, and trade within their clients' employer-sponsored retirement accounts ... without plan sponsor oversight. Credential sharing presents security risks to our customers ... Fidelity ... will begin taking steps to prevent platforms reliant on credential sharing from accessing and taking action in customer accounts held at Fidelity. This change is with customers' best interests in mind to enhance security and reduce customer data exposure."

Senators Urge Fidelity to Discontinue Bitcoin 401(k)s

"Senators Richard (Dick) Durbin, Elizabeth Warren, and Tina Smith sent a letter to Fidelity on Monday, November 21st, urging Fidelity to reconsider its exposure to cryptocurrencies. Their primary concern is with Fidelity's inclusion of Bitcoin into some of its 401(k) pension plans."

Appeals Court Affirms Dismissal of Fidelity 'Infrastructure Fee' Lawsuit

"Fidelity describes the fee as compensation for the costs of maintaining the platform. But the plaintiffs alleged the fee is a 'pay-to-play' charge for access to Fidelity's retirement plan investors that violates Fidelity's ERISA fiduciary duties.... The appellate court, like the lower court, rejected all of the plaintiffs' theories for fiduciary status[.]" [In re Fidelity ERISA Fee Litigation, Wong v. FMR LLC, No. 20-1286 (1st Cir. Mar. 5, 2021)]

New Fidelity Fee Decision Addresses Several Important Issues for Plan Fiduciaries

"[T]he court's 67-page opinion addresses ... a plan fiduciary's obligations with respect to self-directed brokerage accounts and the consideration of collective investment trusts and separate accounts as alternatives to mutual funds. The court also ruled that relief may be available against Fidelity even if Fidelity's breach caused no harm to the Plan and did not result in any profit to Fidelity." [Moitoso v. FMR LLC, No. 18-12122 (D. Mass. Mar. 27, 2020)]

Fidelity Beats Back ERISA Challenge: Infrastructure Fee Complaint Dismissed

"The plaintiffs argued that Fidelity was a fiduciary because its decisions over the past several years to charge -- and increase -- the infrastructure fees showed that Fidelity had discretion over its own compensation. The court rejected this theory on the grounds that Fidelity negotiated the fees with the mutual funds and that the funds were not required to pass the fees on to the plans or participants." [In re Fidelity ERISA Fee Litigation, No. 19-10335 (D. Mass. Feb. 14, 2020)]