Caterpillar Inc. Peoria, Ill., said it agreed to pay $16.5 million to participants in its four 401(k) plans with a combined $5 billion to settle a federal lawsuit that claimed the participants paid excessive fees.
Caterpillar also will “increase and enhance” communications with employees about 401(k) investment options and associated fees as part of the two-year settlement period. The company won't include retail mutual funds as core investment options in the plans, agreed to issue an RFP to “select or retain” the plan's record keeper, and will issue RFPs as plan service contracts come up for renewal, according to a Caterpillar news release. The plan's current record keeper could not be learned by press time.
“Caterpillar has agreed to greatly benefit its employees and retirees going forward,” Jerome Schlichter, founding partner of the law firm Schlichter, Bogard & Denton, said in a telephone interview. Mr. Schlichter's law firm, which filed the lawsuit against Caterpillar, has similar suits pending against 14 other companies, Mr. Schlichter said.
The settlement is pending approval of an independent fiduciary and U.S. District Court Judge Joe Billy McDade in Peoria. Legal expenses will be deducted from the settlement.
“We feel and believe we would have prevailed in the end,” Jim Dugan, a Caterpillar spokesman said in an interview. “But we made a strategic decision that it did not make sense to spend perhaps five to seven years in litigation involving an extremely technical and complex set of regulations. It was litigation over a business (serving as the investment manager for the plans) we're no longer in and prior to the lawsuit had made a decision to exit.”