Participants fired a broadside against corporate sponsors of eight major 401(k) plans, alleging the companies failed to monitor and disclose fees under so-called revenue-sharing arrangements.
The litigation puts an intense spotlight on revenue sharing. In the long run, it could place pressure on fees paid to managers and record keepers of 401(k) plans.
The eight corporations sued are: Lockheed Martin Corp., Bethesda, Md., with more than $14 billion in defined contribution assets; United Technologies Corp., Hartford, Conn., nearly $14 billion; Northrop Grumman Corp., Los Angeles, more than $11 billion; Caterpillar Inc., Peoria, Ill., $4.5 billion; General Dynamics Corp., Falls Church, Va., $5.96 billion; International Paper Co., Memphis, Tenn., $4.4 billion; Bechtel Corp., San Francisco, $3.9 billion; and Exelon Corp., Chicago, with more than $3 billion.
The class-action suits all allege the companies failed to meet their fiduciary duties by ignoring payments that managers used by their 401(k) plans made to record keepers and other service providers. What's more, the suits, all filed by the law firm of Schlichter, Bogard & Denton, St. Louis, charge that the companies failed to disclose these fees to participants, as required by the 1974 Employee Retirement Income Security Act.
The lawsuits also allege that companies that offered employer stock funds as part of their plans — Lockheed Martin, United Technologies, Northrop Grumman, Caterpillar, General Dynamics and International Paper — charged high management fees for the funds and held too much of the assets in cash, which reduced participants' returns.