A lawsuit alleging excessive fees and imprudent investments with assets from a 401(k) plan has cleared the hurdle of achieving class action certification. Although the case’s outcome is still far from a resolution, one employment attorney says it can provide a teaching moment for due diligence in retirement investments by employers.
Judge Robert Blackburn, U.S. District Court Judge for the District of Colorado, granted class action certification for elements of Troudt v. Oracle Corp. on Jan. 30. Oracle’s 401(k) plan participants filed the suit in 2016 in Colorado federal court under the Employee Retirement Income Security Act. The case has alleged Oracle incurred unreasonable expenses on its 401(k) plan by paying uncapped fees to plan trustee Fidelity Management Trust using a revenue-sharing model based on the plan’s assets, rather than a fixed-fee model tied to the number of participants.
According to the complaint, the plan’s assets increased from $3.6 billion to more than $11 billion between 2009 and 2014. That meant Fidelity’s revenue also increased significantly, despite no change in the services it provided, the complaint stated.
The case also alleges the defendants did not have a prudent process for choosing and keeping investment options.