Pension Protection Act Blog

The U.S. District Court for the Western District of Wisconsin dismissed the 401(k) fee lawsuit filed against Deere & Company and Fidelity last week. In an opinion by Judge Shabaz, the Court granted the motion to dismiss filed by Deere & Fidelity.

Participants in Deere & Company’s 401(k) plan alleged that the investment options offered by the plan contained excessive and unreasonable fees, and the plan failed to adequately disclose information about those fees and costs to the participants. The Court, stating that nothing in the statute or regulations require such disclosures, found that Deere’s failure to disclose did not violate the present statute. The Court acknowledged that the Dept. of Labor has policy concerns with the present state of 401(k) fee disclosure, but those policy concerns do not rise to the level of authority to sustain a cause of action against Deere and Fidelity.

The Court also dismissed the participants’ claims that Deere breached it’s fiduciary duty by selecting and offering investment options with unreasonably high fees, finding that the language of the ERISA regulations do not require disclosure of revenue sharing arrangements or a sufficiently detailed breakdown of other expenses not specifically required by the regulations. The Court stated that requiring such disclosures would “require judicial expansion of the detailed disclosure regime crafted by Congress and the Department of Labor pursuant to its statutory authority.”

In an interesting note, the Court states that even if the participants had received this degree of disclosure, it would not have been material to their ability to assess the investment opportunity in those investments. The Court found that a participant, “in assessing the likely return on an investment, the fees netted against the return are certainly relevant, but knowing the subsequent distribution of those fees has no impact on the investment’s value.”

Having found that the participants’ claims against Deere & Company should be dismissed, the Court then dismissed the causes of action against Fidelity, finding that Fidelity could not be liable because Fidelity did not have fiduciary responsibility for making plan disclosures or selecting plan investments.

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