A major defense contractor with employees in Washington, D.C., and across the country is settling a class action suit linked to its retirement plan. Members of Northrop Grumman’s 401(k) plan brought a lawsuit under the Employee Retirement Income Security Act (ERISA), a law that protects employee benefits from misuse, mismanagement or violation of fiduciary duties. Members of the plan said that the participants’ assets were placed at risk by management decisions, including charging excessive fees and overpaying for plan administration.
The case began in 2006 with allegations that Northrop Grumman’s retirement plan was paying excessive fees, wasting employees’ retirement funds. While this suit was settled for $16,750,000, it only addressed the issue of excessive charges prior to May 11, 2019. However, they brought a new lawsuit in 2016, saying that they continued to pay excessive fees and that their plan holdings were put at risk by the company’s investment choices. However, by August 2019, the case continued with one remaining claim, that the defense contractor violated its duties to plan participants by choosing active management for one of its funds, which is more expensive than a passive management style. By 2014, the company had shifted to passive management for all of its 401(k) plans.
Just before the case was to go to trial, the company agreed to pay $12,375,000 to settle the case. The named plaintiffs will receive $25,000 each, and the rest will be distributed among plan participants after attorneys’ fees and costs are paid.
Employers that operate retirement funds for their employees have a responsibility to manage them prudently and effectively, protecting participants’ money from excessive risk, poor expenses or high fees. People who have lost money because of the decisions made in managing their 401(k) plans may consult with an attorney about potential ERISA benefits claims litigation.