Lockheed Settles Lawsuit That Claimed Its 401(k) Charged Excessive Fees

By Liz Moyer 

Lockheed Martin Corp. will pay $62 million to settle a civil lawsuit that claimed its employee 401(k) retirement plan charged participants excessive fees.

It is the largest settlement of its kind reached against a single company, and one of more than a dozen cases in the past six years that have focused on 401(k) plan practices.

In reaching the settlement, which a judge still has to approve, the Bethesda, Md.-based defense company agreed to submit to monthly evaluations of aspects of its plan, offer low-cost funds to participants and solicit bids from at least three outside firms that have experience handling the administrative aspects of large company retirement plans.

"We are pleased to have achieved this historic settlement," said Jerome Schlichter, a lawyer at the St. Louis firm Schlichter, Bogard & Denton, who represented the plaintiffs.

The case had been headed to trial in December when a settlement was reached. The terms were announced on Friday.

The Lockheed case, which was filed in September 2006, accused the company of imprudently managing employee retirement savings in funds that charged high fees, allowing a high level of employee savings to be held in low-yielding money-market funds, and paying excessive record-keeping fees. Lockheed Martin denied the allegations.

"Lockheed Martin has agreed to settle this matter so that we can return our focus to the critical and important work we are performing for our customers," the company said in a statement. "Lockheed Martin and the plaintiffs agree that the settlement--which is less than 5 percent of the plaintiffs' claimed damages--is not an admission of liability or wrongdoing."

The Lockheed retirement plan has 100,000 participants and $27 billion of assets, making it the fifth-largest 401(k) plan in the U.S.

The case is one of 13 pending or settled cases that have accused U.S. companies of failing to act in the best interest of employees who participate in their 401(k) plans. The issues they raise include failing to monitor excessive fees, favoring high-cost retail mutual funds over lower-cost options and funneling employee savings into investment products managed by affiliate companies.

The U.S. Supreme Court is scheduled to hear arguments next week in a similar lawsuit focused on the 401(k) plan offered by Edison International, a California utility.

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