Plan sponsors and retirement plan advisors felt a disturbance in the force last week as news came that the largest settlement in 401(k) fee litigation history was approved by the court.
Law firm Schlichter, Bogard & Denton proudly announced that it obtained final court approval for its historic $62 million settlement on behalf of Lockheed Martin employees and retirees from Chief U.S. Judge Michael Reagan of the Southern District of Illinois.
It is same law firm that also recently won a unanimous 9-0 decision for the Supreme Court in closely watched Tibble v. Edison International.
The most recent case, Abbott v. Lockheed Martin, alleged excessive fees in two of Lockheed Martin’s 401(k) plans, as well as imprudent management of certain investment options offered to employees.
“This settlement achieves powerful benefits for Lockheed Martin employees and retirees not only from the money they will receive but also from valuable improvements in the 401(k) plan for the future, including competitive bidding for services to the plans, state of the art disclosures, lower overall fees, and monitoring by the Court to ensure compliance,” Jerome Schlichter, Founding and Managing Partner of Schlichter, Bogard & Denton, who led the case for the Lockheed employees, said in a statement. “This settlement will enhance the employees’ and retirees’ ability to build a meaningful retirement for the future.”
“The settlement is the largest ever for a case of this kind against a single employer,” observed Thomas E.
Plaintiffs alleged that Lockheed Martin breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA). Plaintiffs alleged that the defense contractor imprudently managed and invested plan participants’ retirement savings in funds that charged excessively high fees, diminishing returns. Further, they alleged that Lockheed Martin allowed an unreasonably high level of participants’ retirement assets to be held in low yielding money market funds for State Street Bank & Trust, with whom Lockheed Martin had multiple business relationships. Plaintiffs also alleged excessive fees were charged for recordkeeping services to the Plan.
Lockheed Martin denied all of the allegations and contended it complied in all respects with the law and that the fees were reasonable.
The case was originally scheduled for trial in the Southern District of Illinois last December, but the parties reached an eleventh-hour settlement following extensive negotiations.
Court documents indicate the class includes over 180,000 current and former employees of Lockheed Martin. Lockheed Martin’s plan, with over $27 billion in assets, is the fifth largest 401(k) in the United States.
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