Sponsors, take heed. The terms of two settlements in retirement plan cases, one for a record amount, were agreed upon this week, with both cases being represented by law firm Schlichter, Bogard & Denton.

In the first case, Abbott v. Lockheed Martin, a $62 million settlement was approved on behalf of employees of aircraft company Lockheed Martin by Chief U.S. Judge Michael Reagan of the Southern District of Illinois.

The case alleged excessive fees in two of Lockheed Martin’s 401(k) plans, as well as imprudent management of certain investment options offered to employees.

Plaintiffs alleged that Lockheed Martin breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA), and 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, for its part, 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. The case encompassed eight years of litigation.

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.

In the second case, Krueger v. Ameriprise Financial, a $27.5 million settlement was approved on behalf of Ameriprise employees and retirees by Judge Susan Richard Nelson of the United States District Court for the District of Minnesota.

It too alleged excessive 401(k) fees in the complaint filed more than three and a half years ago. The plaintiffs alleged that Ameriprise breached its fiduciary duties under ERISA by failing to ensure that the recordkeeping and management fees and expenses paid out of the assets in the plan were reasonable.

Additionally, they alleged that the plan’s fiduciaries breached their fiduciary duties in selecting and retaining proprietary investment options.

Ameriprise denied all of the allegations, and contended that the fees were reasonable. It also contended that it complied in all respects with the law and did not commit any fiduciary breaches.

In the settlement, Ameriprise has agreed to terms designed to strengthen and add value to its 401(k) plan as part of the nonmonetary relief provisions. Under the provisions, Ameriprise has agreed to conduct a request for proposal competitive bidding process for recordkeeping and investment consulting services; will pay flat fees to the plan recordkeeper or on a per-participant basis; and limits in compensation for administrative services provided to the plan and other reimbursement of expenses from the plan.

Ameriprise must provide participant statements that comply with all applicable Department of Labor regulations; and consider the use of less expensive collective investment trusts or separately managed accounts. The court will retain jurisdiction to monitor compliance for three years.

Instant Insights /

Settlements reached in two major retirement plan cases

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