December 15, 2014 – A trial gets under way in St. Louis on Monday that could have a big impact on the way companies select 401(k) plans for their employees.
Lockheed Martin is being sued for choosing retirement funds that shortchanged its employees and charged high fees. The case tests the limits of a company’s responsibilities to its employees at a time when 401(k) plans have become a central part of the nation’s retirement system.
With $26 billion in assets and more than 120,000 participants, Lockheed Martin’s 401(k) plan is one of the largest in the country. Attorney Jerry Schlichter says it has also been managed in a way that violates many of the industry’s best practices.
“This was something that was expected,” Schlichter says. “It was something that they did not, we contend, adequately manage, and the results were predictable.”
Schlichter is something of a thorn in the retirement industry’s side right now. He’s brought class-action suits against nearly a dozen companies — including Caterpillar and General Dynamics — for the way they managed their retirement funds. He won a case against North-Carolina based ABB earlier this year, and a suit he brought against the Edison utility company will be heard by the U.S. Supreme Court in February.
These cases have helped focus new attention on the way 401(k) plans are managed. Mike Alfred, CEO of Brightscope, a company that rates retirement funds, says 401(k) plans have become something of an afterthought at many companies. He says that’s probably because they do nothing to boost the company’s bottom line.
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