Terms of a trial eve settlement in Boeing’s 401(k) excessive fee lawsuit have finally come to light.
Boeing has agreed to pay $57 million to settle the lawsuit, in which it was accused of charging excessive fees and choosing higher-cost investment offerings for the workers and retirees who participate in its $44 billion 401(k) retirement plan. A joint motion for approval of the settlement was filed by the parties in the Court of Chief Judge Nancy J. Rosenstengel of the U.S. District Court for the Southern District of Illinois.
The settlement amount is the second highest in excessive 401(k) fee litigation, after the $62 million settlement reached in the case of Abbott v. Lockheed Martin. In both lawsuits, the plaintiffs were represented by the St. Louis-based law firm Schlichter, Bogard & Denton LLP, and both were settled just hours before trial.
The complaint against Boeing, originally filed in September 2006, alleged that the excessive fees were imposed on the plan through a combination of hard-dollar payments and hidden revenue-sharing transfers, and that the defendants breached their fiduciary obligations by not disclosing the fee arrangements.
Additional claims were added to the lawsuit in 2007, including charges that the defendants:
- offered mutual funds rather than leveraging the plan’s asset size to convince investment managers to set up less expensive separate accounts;
- failed to capture millions of dollars in income streams for the benefit of participants, including sweep fees, rebates from securities lending and earnings from the foreign currency exchange market; and
- included actively managed fund options rather than concentrating on less expensive and better performing passive funds.
Boeing denied all of the allegations and contended it complied in all respects with the law.
Subsequently, Boeing has obtained competitive bids, replaced mutual funds with lower priced separate accounts, and agreed to retain an independent investment consultant to review or not to offer a technology sector fund in the plan, according to a press release from the plaintiffs’ counsel.
With the settlement, nine large companies — including Ameriprise Financial, Cigna and Kraft Foods — have now paid a combined $271.5 million over class-action lawsuits brought on behalf of workers by Schlichter, who has pushed major corporations for more accountability in the retirement plans they offer.
Boeing has the second-largest retirement plan among American companies.
