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Nvidia has reached a deal with a group of former employees to settle a proposed class action in California federal court. The lawsuit alleged that the technology giant mismanaged its $1 billion 401(k) plan by failing to reduce recordkeeping fees and investment costs, thereby violating federal benefits law.

Nvidia Deal In 401(k) Mismanagement Suit : Judge Grants Request to Stay Case

U.S. District Judge Jon S. Tigar approved a joint request on Tuesday from Nvidia and the former employees to put the case on hold while both sides finalize the terms of the deal. The parties plan to submit a more detailed settlement agreement by Nov. 26.

"The parties attended a mediation session on Sept. 23," they stated, "and executed a binding terms sheet on Sept. 26, 2024. They are now working to draft the final settlement agreement."

If approved, the settlement would close the August 2020 lawsuit accusing Nvidia of violating the Employee Retirement Income Security Act (ERISA). The former employees claim that Nvidia's failure to properly manage its 401(k) plan cost participants millions in savings due to excessive fees.

Allegations of Overpriced Fees and Costly Investments

The plaintiffs argue that the size of Nvidia's 401(k) plan should have entitled participants to significantly lower fees. They alleged that plan participants paid between $53 and $63 to Fidelity for recordkeeping, but should have paid roughly half that amount, based on fees in comparable plans.

Additionally, the ex-workers accused Nvidia of sticking with higher-fee investments when more affordable options were available. They argued that the company could have chosen lower-cost share classes of mutual funds, which would have been more in line with ERISA’s fiduciary duty of prudence.

Nvidia Deal In 401(k) Mismanagement Suit : Case History and Legal Proceedings

U.S. District Judge Lucy H. Koh initially dismissed the lawsuit in September 2021, but allowed the former employees to amend their complaint. Nvidia argued that the claims still lacked sufficient detail to show the company had breached its fiduciary duties under ERISA.

In September 2023, Judge Tigar ruled in favor of allowing the case to proceed, saying the workers had provided sufficient evidence regarding key issues, including how Nvidia’s recordkeeping fees compared to similar plans. The judge acknowledged Nvidia’s concerns about whether a $35 recordkeeping fee was appropriate but noted that resolving that issue wasn’t necessary at that stage.

The former employees had also moved for class certification in March, but the court has yet to make a decision on that request.

Nvidia Deal In 401(k) Mismanagement Suit : Legal Representation

The former workers are represented by attorneys Daniel L. Germain of Rosman & Germain LLP, and by Mark K. Gyandoh, James A. Wells, and Donald R. Reavey of Capozzi Adler PC. Nvidia’s legal team includes Clarissa A. Kang, Dylan D. Rudolph, and Catherine L. Reagan of Trucker Huss APC.

The resolution of this Nvidia deal in the 401(k) mismanagement suit marks a critical juncture in a case that could impact how companies handle employee retirement plans moving forward. Both Nvidia and the former employees have yet to comment on the developing settlement.