On July 18, 2025, two former employees ("Plaintiffs") of Nokia of America Corporation ("Nokia" or the "Company") filed a class action lawsuit against the Company, as well as Nokia's Administrative Oversight Committee, Pension & Benefit Investment Committee, Employee Benefits Committee, and the Nokia Investment Management Corporation ("NIMCO") in New Jersey federal court. The suit alleges that Nokia mismanaged the Nokia Savings/401(K) Plan (the "Plan") by investing in at least two funds that underperformed their benchmarks for significant periods of time, thereby breaching fiduciary duties established by the Employee Retirement Income Security Act of 1974 ("ERISA").
Fiduciary Duties and Protections Under ERISA
ERISA establishes standards of conduct, known as fiduciary duties, that must be upheld when making decisions regarding the investment of benefit plan assets and payment of plan fees. Fiduciaries, which often include plan trustees, plan administrators, members of a plan's investment committee, and the sponsoring company, must act in the best interest of plan participants when making decisions on behalf of the plan. Courts place great weight on ERISA's fiduciary duties, noting that they are the "highest known to law."
ERISA also requires fiduciaries to establish a grievance process for participants and creates a right for participants to sue if fiduciary duties are breached. According to the Department of Labor, potential breaches can arise from:
- Failing to operate the plan for the exclusive benefit of participants;
- Using plan assets to benefit certain related parties to the plan;
- Failing to properly value or hold plan assets in trust;
- Failing to follow the terms of the plan (if the terms are compliant with ERISA);
- Failing to prudently select and monitor service providers; and
- Retaliating against any individual for exercising his or her rights under the plan.
The Nokia Lawsuit
The ERISA lawsuit against Nokia claims that the Company failed to act prudently in investing the Plan's assets, monitoring the Plan's investments, and removing underperforming funds from the Plan. The two funds at issue are the U.S. Large Cap Growth Equity Fund and the International Equity Fund, which allegedly exhibited "historical underperformance" sufficient to warrant removal from the Plan. According to Plaintiffs, the U.S. Large Cap Growth Equity Fund underperformed the Russell 1000 Growth Index "on a cumulative, trailing-three-year basis in eight of the last nine years, including for three consecutive years from 2016-2018." The International Equity Fund also failed to keep up with its benchmark, the MSCI ACW ex USA Standard Net Dividend Index, on a one- and three-year basis for six of the nine last years, including four consecutive years from 2018-2021.
The lawsuit argues that these funds were not reasonable investments for the Plan, and that Nokia should have replaced them with less risky and better performing options. As of December 31, 2023, Plan assets totaled over $9 billion, with an estimated 11% invested in underperforming funds. Plaintiffs claim the Plan's investment in these underperforming funds cost participants more than $100 million.
The lawsuit is Sims et al. v. Nokia of America Corp. et al., case number 2:25-cv-13494, filed in the U.S. District Court for the District of New Jersey.
Best Practices for ERISA Fiduciaries
A well-structured and prudently monitored retirement plan can help fiduciaries avoid litigation like the case against Nokia. Employers that offer ERISA-governed benefit plans should ensure that fiduciaries do not have conflicts of interest that could arise when making decisions about plan functions or investments. Plan sponsors should create comprehensive plan documents which establish procedures for the selection and regular monitoring of plan investments, third-party service providers, and any corresponding fees. Fiduciary committees should keep detailed records of meetings and the rationale behind decisions made for the plan. Additionally, plan sponsors should provide participants with comprehensive investment and fee information on a regular basis.
The allegations in the Nokia case are a prime example of how failure to comply with these practices can expose employers to 401(k) plan mismanagement litigation under ERISA.
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