Plan Participant Personal Information: Retirement Plan Asset?

Earlier this year, a lawsuit was filed in U.S. District Court for the Southern District of Texas against Shell Oil Company by several participants in the company’s 401(k) plan, claiming that Shell allowed its plan recordkeeper – Fidelity Investment Institutional Operations Company, Inc. (FIIOC) – to use the participants’ personal information to cross-sell other financial products and services outside the plan in breach of its fiduciary duties under ERISA.

At the heart of the plaintiff’s case is their contention that 401(k) plan participant data is a plan asset and the use of that data for nonplan purposes constitutes a breach of fiduciary duty under ERISA. According to the complaint, Fidelity shared Shell 401(k) plan participant data with its sister companies to facilitate the sale of nonplan products and services by those companies.

The complaint alleges that, in one instance, Fidelity used plan participants’ personal data to identify Shell employees nearing retirement age so Fidelity salespeople could target them for rollovers into Fidelity IRAs, even though IRAs typically command higher fees than 401(k)s. Plaintiffs allege that in doing so, Fidelity acted in its own best interests, not in the best interests of plan participants.

Is Participant Data a Plan Asset?

Since ERISA does not define “plan assets,” plaintiffs contend that “plan assets” has the meaning of the term at common law at the time ERISA was enacted, unless the statute (or, in this case, the Secretary of Labor) dictates otherwise.

“Under the common law meaning at the time of ERISA’s enactment, a data set of intimate knowledge of financial and personal information combined with insider knowledge of exploitable triggering events, such as years to retirement, marital status and beneficiary status, was clearly an ‘asset.’” And since “…this information is collected by the Plan for the exclusive purpose of administering the Plan and providing benefits to participants, it is a Plan asset, not property of the Plan’s recordkeeper or custodian of that information, such as FIIOC.”

Plaintiffs also rely on ERISA’s fiduciary duty provisions to support their claim that plan data was misused:

  • A fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries. 29 U.S. Code § 1104
  • A fiduciary with respect to a plan shall not cause the plan to engage in a transaction, if he knows or should know that such transaction constitutes a direct or indirect…transfer to, or use by or for the benefit of a party in interest, of any assets of the plan. 29 U.S. Code § 1106(a)(1)

In addition, plaintiffs contend that Shell 401(k) plan investments included more than 300 options, “most of which are Fidelity’s proprietary mutual funds,” and that these funds were retained by Shell “without any ongoing monitoring … to ensure that they remain prudent.”

The case is Harmon et al v. Shell Oil Company et al.

Hall Benefits Law’s vision is to provide every client with the peace of mind that comes from the confidence that HBL has addressed all possible compliance vulnerabilities. To learn more, call our team of responsive, experienced ERISA and employment counsel at 678-439-6236.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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