General Dynamics Corp., Falls Church, Va., and Fiduciary Asset Management tentatively agreed to a $15.15 million settlement to resolve a class-action lawsuit alleging GD violated its fiduciary responsibilities by allowing Fiduciary Asset Management to charge excessive fees to participants in two GD 401(k) plans.
General Dynamics' insurers and FAMCO's insurers and other sources will fund the $15.15 million settlement, according to a General Dynamics news release dated Aug. 5.
”General Dynamics, FAMCO, and FAMCO's parent company (Piper Jaffray) will not contribute to the settlement fund,” the release said.
“After a deduction for plaintiffs' attorneys fees and administrative costs for settlement, the settlement fund will be allocated to the accounts of 401(k) plan participants and authorized former participants based generally upon the number of years a participant maintained an account balance” in one or both of General Dynamics 401(k) plans, subject to the litigation, the statement said.
The amount of the attorney fees and administrative costs was not available.
The companies reached the tentative agreement with Schlichter, Bogard & Denton, the law firm representing plaintiffs in the suit, filed in 2006 against the two companies in U.S. District Court in East St. Louis, Ill.
The plans have combined assets of $6 billion, according to the statement.
“General Dynamics and FAMCO maintain that they have complied with the Employee Retirement Income Security Act of 1974,” the statement said. But “the parties have determined that it is in their best interest, and General Dynamics has determined that it is also in the best interest of General Dynamics' employees, 401(k) plan participants and shareholders, to resolve the lawsuit by settlement.”
“Under the settlement, the parties also will implement certain practices designed to maximize the returns plan participants receive from their 401(k) plan investments by continuing to keep the costs of those investments low, including the use of an outside consultant to review certain aspects of the 401(k) plans and report to General Dynamics and an independent fiduciary, and enhanced disclosures to participants regarding fees and expense associated with their investments,” the statement said.
“In addition, the settlement provides that General Dynamics will continue its long-standing practices of paying for the plans' record-keeping services on a per-participant, rather than an asset, basis, and not providing subsidies to other benefit plans through the 401(k) plans. General Dynamics also will provide credit to the 401(k) plans for volume discounts from investment managers who also provide services to other General Dynamics benefit plans. Finally, the settlement precludes FAMCO from recommending itself as investment manager or recommending the allocation of money to investment accounts it manages.”
The settlement is pending approval of the court and an independent fiduciary retained to represent the interests of 401(k) plan participants, the statement said.
Rob Doolittle, General Dynamics spokesman, said the company isn't commenting beyond its statement because the settlement is pending.
Jennifer Olson Goude, Fiduciary Asset's head of investor and media relations, and Jerome J. Schlichter, managing partner in the plaintiffs' law firm, couldn't be reached for comment.
