Fidelity Faces Another Float Income Suit

Another lawsuit has been filed against Fidelity Investments regarding its use of float income.

Three participants from three different 401(k) plans allege that Fidelity engaged in or caused the plans to engage in prohibited transactions involving plan assets, by using float income to pay its operating expenses and by failing to distribute float income solely for the interest of the plans. As in the previous claim filed against Fidelity (see “Fidelity Facing Suit Regarding Float Income”), the lawsuit used the trial record from Tussey v. ABB, in which the U.S. District Court for the Western District of Missouri held that Fidelity breached its fiduciary duties “when it failed to distribute float income solely for the interest of the Plan” and “when it transferred float income to the Plan’s investment options instead of the Plan.”   

When plan assets are deposited on an interim basis in interest-bearing accounts before invested or disbursed as directed by the plans’ participants, the income earned on or derived from the assets while invested in such accounts is “float income.” (See “Be Careful Not to ‘Float’ into an ERISA Violation.”)  

The lawsuit asks for class action status for the plaintiffs, on behalf of themselves and “Employee pension benefit plans covered by the Employee Retirement Income Security Act of 1974 subject to Internal Revenue Code §§ 401(a), (k), for which Fidelity serves as trustee or service provider, and the participants in those plans.”

The latest complaint, filed in U.S. District Court for the District of Massachusetts, is here.