A pair of recent court rulings in major 401(k) fee lawsuits could be a boon to large corporations that sponsor such plans.
In one suit workers filed against Wal-Mart Stores Inc. and its $9.9 billion 401(k) plan, a federal judge in Missouri has granted the mammoth retailers motion to dismiss the case, which alleged, among other things, that Bentonville, Ark.-based Wal-Mart improperly selected investment options that exposed 401(k) participants to excessive and undisclosed fees.
And just days after that judges ruling, another federal judge in California dismissed several key arguments in a lawsuit 401(k) participants filed against San Francisco-based Bechtel Corp. only weeks before that case is scheduled to go to trial. In this suit, which was filed in 2006 and makes similar arguments that the companys 401(k) fees were unreasonable and improperly disclosed, the judge significantly limited the claims that the Bechtel workers may pursue, noting that many of their original allegations over fees and Bechtels decision-making were unsubstantiated.
There are still more than a dozen other excessive-fee suits against companies such as Deere & Co., Moline, Ill., and Lockheed Martin Corp., Bethesda, Md., hanging in the balance. But the recent progress in the Wal-Mart and Bechtel suits could offer some much-needed clarity and comfort to large corporations that sponsor 401(k) plans, benefits attorneys note. Without much direction from the courts in some of these pending cases, which first started surfacing in 2006, any large company with massive retirement plans could conceivably be vulnerable to such litigation, attorneys stated.
Theres a reason that few, if any, of the companies targeted so far have backed down and opted to reach settlements, noted Robert Rachal, senior counsel and ERISA litigator based in New Orleans at law firm Proskauer Rose LLP. Many have believed that these are highly defensible arguments made with broad, unsubstantiated claims. And apparently, now the courts are starting to find that too.