Alert March 24, 2015

Plan Sponsor Agrees to $62 Million Settlement in ERISA Case Challenging 401(k) Plan Fees

Summary

Lockheed Martin Corp. has settled the 401(k) excessive fee litigation pending against it in federal court in Illinois.

Background

Lockheed Martin Corp. has agreed to settle ERISA fiduciary breach claims brought on behalf of a class of participants in its 401(k) plans (the “Plans”). 

The parties have submitted to the court a joint motion for preliminary approval of the settlement. The case was originally filed in 2006, and has been the subject of several reported decisions. See, e.g., Abbott v. Lockheed Martin Corp., 725 F.3d 803 (7th Cir. 2013).

The claims in Abbott alleged principally that the Plans’ fiduciaries breached their duties under ERISA by allowing the Plans to pay excessive fees and by imprudently managing the Plans’ stable value fund and three company stock offerings. The plaintiffs sought to obtain compensatory and affirmative relief for the Plans. Prior to the announcement of the settlement, the case was scheduled to go to trial in late 2014.

Under the proposed settlement, Lockheed would not admit any wrongdoing, but would make a settlement payment of $62 million to be allocated among class members (net of attorneys’ fees and other costs). In addition, Lockheed agreed to certain non-monetary terms under the proposed settlement. Specifically, Lockheed agreed during the three-year settlement period: (1) to publicly file with the Court the Schedule C to the Plans’ Forms 5500 as well as information about the assets held in, and performance of, the Plans’ stable value fund and company stock funds; (2) to confirm current limitations on the amount of cash equivalents held in the company stock funds and the amount of money market equivalent assets held in the stable value fund, and to file a notice with the Court if those limitations are changed; (3) to initiate a competitive bidding process for the Plans’ recordkeeping services, and to publicly file with the Court a notice identifying the entities that submitted bids and the selected recordkeeper; and (4) to offer participants the share class of investments that has the lowest expense ratio, provided that the share class is available and consistent with the needs and obligations of the Plans.