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New Float Income Lawsuit

Plan fiduciaries of both the Hewlett-Packard Company 401(k) Plan and the United Airlines Ground Employee 401(k) Plan have been sued for allowing the plans’ trustee, Fidelity Management Trust Company and recordkeeper, Fidelity Investments Institutional Operations Company, to use float income related to cash transactions in the plans. More specifically, the suit claims that “if only half of the $2.25 billion in cash distributions made from the HP Plan and the UAL Master Trust had been distributed” to participants via check, Fidelity would have had the use of $1.125 billion in cash generated by the plans for an average of 22 days in 2012, and “unrestricted used of the other $1.125 billion transferred by electronic funds transfer (EFT) “for at least 2 days. The suit also claims that Fidelity “earned interest on the overnight investment of $1.13 billion in contributions to the HP Plan and $255 million to the UAL Plan.” The cash contributions to the plans and the proceeds of the sale of plan assets were diverted to benefit Fidelity, instead of maintaining contribution or disbursement accounts in the name of the plans or for the benefit of the plans and participants.

www.asppa.org; August 23, 2016.