A federal district court gave final approval on Thursday to a settlement in which Caterpillar Inc., Peoria, Ill., will pay $16.5 million to participants in the company's four 401(k) plans, ending a 4-year-old lawsuit in which the participants claimed they paid excessive fees.
“The primary thrust of the plaintiffs' complaints is that (Caterpillar) could, and should, offer cheaper investment options, thus preventing plan participants from paying excessive and unreasonably high fees,” Judge Joe Billy McDade wrote in approving the settlement. “Plaintiffs have a hard row to hoe.”
Due to ERISA's complexity, the judge wrote that the settlement “represents a significant boon to class members in light of the complexity of this litigation, the potential for protracted litigation and the strength of the available defenses recognized” in another ERISA case that favored a company over participants.
The initial agreement to settle the class-action lawsuit was made last November. According to a Caterpillar news release issued then, the company will “increase and enhance” communications with employees about 401(k) investment options and fees as part of a two-year settlement period.
The settlement calls for Caterpillar to exclude “retail mutual funds as core investment options for a period of time” and to “provide additional fee disclosures,” the judge wrote. “(Caterpillar) will be subject to a period of oversight by an independent monitor and fiduciary.”
“In light of the allegations in the complaint and the difficulty and expense associated with a trial on the merits,” the judge added, “the settlement terms represent a fair and economical resolution to this litigation.”
Jim Dugan, a spokesman for Caterpillar, and Jerome Schlichter, founding partner of Schlichter, Bogard & Denton, in St. Louis, who represented the plaintiffs, could not be reached for comment by press time.
