BofA 401k Changes: Investments in a Lawsuit-Plagued Industry



The Bank of America Merrill Lynch institutional retirement platform will manage Bank of America Corporations (NYSE: BAC) $19 billion 401k plan starting in early 2015. The plan is currently managed by Fidelity investments. A Fidelity spokeswoman told Reuters that the company would continue to oversee the transferred savings account defined contribution plan, and the defined benefit pension plan Bank of America offers. 

The company with the most participants in a Bank of America 401k plan is Wal-Mart Stores Inc. (NYSE: WMT). In June, Reuters contacted three people familiar with the discussions who said that Wal-Mart was in discussions with Wells Fargo & Company (NYSE: WFC) about about having its retirement division manage Wal-Mart’s $15.6 billion 401k plan.

In December 2011, Wal-Mart and Merrill Lynch reached a settlement in Braden v Wal-Mart. As a result of the class action lawsuit, Wal-Mart and Merrill Lynch agreed to pay $13.5 million in fees, according to Forbes. The suit alleged that employees were charged high fees for their 401k plans, and that the investment providers had breached fiduciary duties to employees.

About the suit, a Bank of America spokesperson, Bill Halldin, emailed the media outlet. “We are pleased to have been able to work with Walmart to resolve this matter and continue to serve its employees with a high-quality 401k platform.” A group of Fidelity employees are currently suing Fidelity for similar reasons. Fidelity spokesperson Vincent Loporchio told CNN, ”We believe the lawsuit is totally without merit, and we intend to defend vigorously against it. Fidelity has a very generous benefits package that provides significant contributions to our employee’s retirement planning.”

Like the suit by Wal-Mart employees against their employer, this one claims that Fidelity has not provided lower cost options for investment that are available. Instead, the plan is comprised of higher cost Fidelity investments. Court documents seen by CNN state that Fidelity mutual funds account for nearly 85 percent of the assets.

Employees are able to sue employers over 401k plans because, according to the Employee Retirement Income Security Act, employers must act in their employees’ best interests as part of their “fiduciary responsibility.” If Wal-Mart does switch to Wells Fargo, it will not ditch the persistent plague of 401k lawsuits. Wells Fargo settled a lawsuit in 2011 for $17.5 million over unfair investment options for employers.

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