ABB 401(k) Plan Participants See PRISM Plan Changes
On February 27, 2014, participants in ABB, Inc.’s 401(k) Plan were sent a letter [available here] telling them that Plan is in the process of removing all Fidelity-managed investment options and switching the Plan’s recordkeeper from Fidelity to Merrill Lynch. The Plan option changes also involve the removal of the Fidelity Freedom Funds, which will be replaced by the significantly lower-fee Vanguard funds. Other mutual funds are likewise being mapped to less expensive options. For example, participants invested in the Fidelity Low-Priced Stock Fund will see their fees reduced by 91% as they are moved to an index collective trust managed by State Street Global Advisors. The transition is expected to occur in May, 2014.
The PRISM Plan has been the subject of groundbreaking litigation, culminating in a Court Order — after a four-week trial — that “ABB Defendants violated their fiduciary duties to the Plan and its participants when they failed to monitor recordkeeping costs and negotiate for rebates from Fidelity Trust, and selected classes of particular investments to be on the PRISM Plan’s investment platform that had higher expenses when other share classes with lower expenses of those same investments were available, and removed the Vanguard Wellington Fund, and replacing it with the Fidelity Freedom Funds.” Tussey v. ABB, Inc., 2012 U.S.Dist. LEXIS 45240, *115–16 (W.D.Mo. March 31, 2012). The Court found that this addition of Fidelity Freedom Funds by elimination of Wellington and forcing Wellington Funds into Freedom was a breach. Id. at *104. The Court’s Order, and its current appeal, were previously discussed on this blog [here].
The latest plan changes come after the Court’s order requiring that ABB utilize a competitive bidding process, including a request for proposal, to select a new recordkeeper and that “For investments on the Plan’s investment platform, ABB shall choose the share class of investments that has the lowest expense ratio.” Id. at 114.
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