A district court judge has ruled that Oracle will in have to defend itself regarding its 401(k) Plan.
Plaintiffs allege the Oracle Corporation 401(k) Savings and Investment Plan “caused participants to pay recordkeeping and administrative fees to Fidelity that were multiples of the market rate available for the same services.”
In addition, the complaint says, Fidelity “is the sixth largest institutional holder of Oracle stock, owning over $2 billion shares.”
So the plaintiffs suggest, Fidelity “has the influence of a large stockholder in light of its stock ownership.” The result is that “Oracle has chosen and maintained funds from one of its largest shareholders, Fidelity, to be investment options in the plan.” Plaintiffs suggest this relationship has led to conflicts of interest that have harmed participants and retirement plan performance.
I can’t opine on Oracle’s chances in the lawsuit, but it confirms everything I’ve ever said regarding the choice of plan providers. Choosing plan providers where there is some underlying relationship that implies that the choice of plan provider was done to benefit the plan sponsor is something to avoid. Any suggestion of impropriety will lead to an ERISA litigator alleging that something improper was done even if it wasn’t improper. I think Oracle shouldn’t have selected a bundled provider like a Fidelity or any other large mutual fund company because of the likelihood that provider is an institutional shareholder of the employer. If it looks improper, avoid it.