A court found ABB Inc. and Fidelity Management Trust Company
breached some fiduciary duties owed to participants in ABB’s retirement plans.
Specifically, U.S. District Judge Nanette K. Laughrey of the
U.S. District Court for the Western District of Missouri found the ABB
defendants violated fiduciary duties to the plans when they failed to monitor
recordkeeping (RK) costs; failed to negotiate rebates for the plan from either
Fidelity or other investment companies chosen to be on the plans’ platform;
selected more expensive share classes for the investment platform when less
expensive ones were available; and replaced the Vanguard Wellington Fund with
Fidelity Freedom Funds on the investment menu.
Laughrey ruled that ABB breached its fiduciary duty to the
plans because it failed to comply with the plans’ investment policy statement
asserting that, “at all times, [Alliance] rebates will be used to offset or
reduce the cost of providing administrative services to plan
participants.”
Laughrey wrote in her opinion, “ABB had good information
about how the investing habits of plan participants might affect the
availability of revenue sharing, so it had a reasonable basis for conducting
such an investigation.” She said she was unconvinced ABB monitored the
reasonableness of Fidelity Trust recordkeeping fees by monitoring the
reasonableness of the expense ratio of the retail investments chosen for the
plans’ platform.
The court also found ABB Inc. and its employee benefits
committee violated fiduciary duties to the plans by agreeing to pay Fidelity an
amount that exceeded market costs for plan services; they did this in order to
subsidize the corporate services provided to ABB by Fidelity, such as payroll
and recordkeeping for its health and welfare plan and its defined benefit (DB)
plan.