The importance of understanding and upholding fiduciary duties is more critical than ever as recently demonstrated by the Tussey v. ABB, Inc. verdict. A judgment against ABB and its record keeper, administrator and (through its affiliate) investment manager Fidelity awarded $37 million to participants in ABB’s two 401(k) plans. Federal district court judge Nanette Laughrey found that the plan’s fiduciaries failed to: observe increasing plan assets and renegotiate fees; calculate the fees paid to Fidelity, and listen to a hired third-party consultant when he pointed out the excessive plan fees.
ABB’s fiduciaries breached their duties in several ways. The excessive fees helped to subsidize costs of other plans and services provided by Fidelity with the knowledge of at least one fiduciary. Although ABB had an Investment Policy Statement, which dictated procedures for choosing investments, the fiduciaries did not follow the policy. Furthermore, the fiduciaries selected pricier share classes over better performing, less expensive ones in order to subsidize the company’s costs. So much for the fiduciary duties of loyalty and prudence.