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A New Jersey federal district court judge granted a partial motion to dismiss in a Novo Nordisk 401(k) suit alleging violations of the Employee Retirement Income Security Act (ERISA). The judge cut claims that Novo Nordisk illegally used forfeited funds to pay future employer contributions to the plan and maintained a poorly performing target date fund in its plan.
The case is Fumich et al. v. Novo Nordisk Inc. et al., Case Number 3:24-cv-09158, U.S. District Court for the District of New Jersey.
After the partial dismissal, the workers' only remaining claim alleges that the company charged plan participants excessive fees in administering its $2.3 billion 401(k) plan. Workers say that the plan's retirement committee breached its fiduciary duty of prudence by overcharging plan participants for recordkeeping fees, which were $10 to $20 higher than comparable plans. According to the workers, the company's fiduciary duties require it to consider alternatives to reduce the high fees.
The workers had alleged that the plan failed to substitute a better-performing investment option for the Schwab Managed Retirement Target Date fund, which had underperformed. However, the judge rejected these allegations as merely speculative, stating that the workers failed to show any specific details that the retirement committee made poor choices in retaining the Schwab target date fund. As the judge pointed out, the potential for misconduct does not necessarily equate to a fiduciary duty violation.
Likewise, the judge rejected the workers' claim that Novo Nordisk used $6.2 million in employer matching funds, that former employees forfeited when they left the company before their vesting dates, to offset its own contribution costs to the plan. The workers alleged that the company should have instead used the funds to reduce plan expenses for their benefit.
However, the judge noted that the text of the plan specifically allowed Novo Nordisk to use the forfeited funds to offset its future contributions to the plan, restore the forfeited accounts, or reduce plan expenses. As a result, the plan's terms do not require the company to use the funds for only one of three permissible options.
Furthermore, the judge disagreed with the workers' allegation that Novo Nordisk's forfeited funds violated ERISA's anti-inurement provision. The judge stated that the company was only required to provide the benefits outlined in the plan, not to maximize benefits for workers.
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