Boeing Settles Retirement-Plan Class Action Suit -- Update
August 26 2015 - 8:03PM
Dow Jones News
By Sara Randazzo
Boeing Co. agreed on Wednesday to a preliminary deal to settle a
long-running lawsuit accusing the company of mishandling its 401(k)
plan to the detriment of its employees.
The settlement comes the day a trial was scheduled to begin in
the nine-year-old case. Terms weren't disclosed. The two sides are
expected to update the court on details of the talks next month and
set a timeline for seeking final approval, according to a court
order.
Filed on behalf of 190,000 Boeing employees and retirees, the
class-action suit accused Boeing of failing to uphold its fiduciary
duties to employees by allowing excessive 401(k) fees to go
unchecked, choosing higher-cost retail mutual funds over cheaper
options, and improperly making 401(k) plan decisions to benefit
vendors receiving other Boeing business.
Boeing, which has defended its 401(k) practices and denied the
claims, had no comment Wednesday on the settlement.
Attorney Jerome Schlichter, who represents the plaintiffs, said
he was prepared to go to trial and is pleased to have reached a
provisional settlement. He said his firm continues to be committed
"to improving the 401k savings plans that millions of Americans
rely on for a secure retirement."
The Boeing suit is one of a string of similar class actions
targeting major companies over the past decade for alleged
violations of the federal Employee Retirement Income Security Act,
or ERISA. Very few have gone to trial. In December, Lockheed Martin
Corp. reached a $62 million settlement the week its trial was set
to begin, the largest payout so far in a suit of this kind.
Mr. Schlichter also represented the Lockheed plaintiffs and
negotiated a $27.5 million deal with Ameriprise Financial Inc.
earlier this year. All told, settlements in eight of his suits have
brought in $214 million, with about a third of that going to Mr.
Schlichter's law firm.
In addition to monetary recoveries, the settlements often
require the companies to agree to permanent changes to their 401(k)
practices.
One of Mr. Schlichter's cases, against Southern California
utility Edison International, went to a partial trial and earlier
this year reached the U.S. Supreme Court. The court ruled
unanimously that companies have a continuing duty under ERISA to
monitor and remove imprudent investments included in a retirement
plan.
Boeing's $44 billion 401(k) plan is the second-largest in the
nation after International Business Machines Corp., according to
the Labor Department.
Regulation of the 401(k) industry falls to the Labor Department,
which has sometimes filed briefs in support of cases brought by
private attorneys. While the agency has pursued some companies on
its own for allegedly excessive fees, it more often uses its
resources to investigate fraudulent plans.
In 2012, the agency implemented new rules that require companies
to clearly disclose all 401(k) fees to employees.
Write to Sara Randazzo at sara.randazzo@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
August 26, 2015 19:48 ET (23:48 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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