AARP filed a friend-of-the-court brief in the case of Tussey v. ABB on the proper measure for damages where a court has found that the defendants have breached their fiduciary duties in the removal and selection of plan investment options.
Plan participants challenged defendant ABB’s fee and revenue sharing arrangement with Fidelity. They claimed that the fiduciaries’ decision to remove a well-performing lower fee fund and substitute a higher fee fund with a minimal track record were both in violation of the plan’s own investment policy and thus a breach of fiduciary duty. Moreover, the fiduciaries and ABB agreed that participants in the lower fee fund would automatically be moved into the new higher fee fund for the purpose of providing Fidelity with additional fees and not for the exclusive benefit of the plan participants.
However, the district court ruled that the participants had not provided evidence of the difference between the performance of the Freedom Funds and the minimum return of the subset of mutual funds the ABB fiduciaries could have chosen without breaching their fiduciary obligations. The court refused to use the lower fee fund that had been removed for the comparison. Thus, the district court ruled that the plaintiffs had not carried their burden of proof on the issue of damages.
AARP Foundation Litigation attorneys filed a friend-of-the-court brief on behalf of AARP, in support of the plaintiffs. The brief explained that ERISA’s legislative history demonstrated that Congress wanted courts to provide for substantial relief when fiduciaries breached their duties to participants. Thus, comparing the investment at issue with the highest performing investment results in a tangible remedy for participants and acts as a deterrent to the fiduciary.
What’s at Stake
The financial security and retirement savings issues involved in this case are of tremendous importance to all workers planning for retirement. Breaches of fiduciary duty caused by high 401(k) fees have a significant impact on employees’ abilities to adequately plan for and save for retirement.
Tussey v. ABB is before the U.S. Court of Appeals for the Eighth Circuit.