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Fidelity infrastructure fee may violate ERISA

Those in Tennessee and across the country who invest in a 401(k), another kind of retirement fund or a mutual fund may take comfort in knowing those investments are protected by federal law. Anyone managing these funds is required by the Employee Retirement Income Security Act to act in the best interests of the investors. Additionally, ERISA requires fund managers to notify participants of any changes in fees or other matters that may affect the assets of the investor. Unfortunately, Fidelity Investments is facing a lawsuit alleging violations of those requirements.

One man in another state has filed a lawsuit on behalf of others participating in a 401(k) serviced by Fidelity. The lawsuit claims Fidelity recently began requiring its mutual funds and other investments to deduct secret fees from the assets of the investors and use the funds to pay kickbacks to Fidelity. The plaintiff alleges these illegal payments may total hundreds of millions of dollars a year and were likely intended to compensate Fidelity for recent declines in revenue-sharing payments.

ERISA requires plan service providers to disclose any changes or hidden fees involving their 401(k)s or mutual funds. The lawsuit claims that Fidelity forbid its investment managers from disclosing to plan participants the amount of the deductions from their assets, despite ERISA requirements. Fidelity denies the charges, calling the deductions an infrastructure fee that was disclosed to participants. Nevertheless, the state is investigating Fidelity’s fee practices.

The purpose of ERISA stipulations is to protect investors and to instill trust in the retirement tools available to those in private industries. When plan managers violate those rules, participants are at risk of entering retirement with far less financial stability than they had planned. Many in Tennessee find that seeking legal advice for these occasions is a good way to improve their chances of recovering losses.