Fidelity Accused of Illegal 401(k) Kickback Scheme

The parent company of Fidelity Investments is accused of forcing mutual funds and other investments to pay secret kickbacks in order to secure a spot on the “FundsNetwork” menu the company offers 401(k) plans.

The proposed class action, filed Feb. 21 against FMR LLC, claims Fidelity runs a “pay-to-play scheme” in which these undisclosed kickbacks are required in the event an investment fund’s distribution fees—so-called 12b-1 fees, which must be publicly disclosed—fall below a certain level.

Fidelity is accused of categorizing these kickbacks as “flat dollar payments” or “infrastructure payments” in an attempt to shield them from disclosure under federal ...