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Northrop Grumman sued by 401(k) participants for fiduciary breach, improper fees

Participants in Northrop Grumman Corp.'s 401(k) plan have filed a lawsuit alleging plan executives and corporate executives violated fiduciary duties, and that the plan improperly paid fees to the corporate parent and paid “unreasonable” record-keeping fees.

“Rather than complying with their strict fiduciary obligations, defendants acted to benefit themselves and Northrop by paying plan assets to Northrop for administrative services (that) Northrop provided to the plan, which were not necessary for administration of the plan,” said the complaint filed Sept. 9 in U.S. District Court in Los Angeles.

The complaint alleged the 401(k) plan paying the corporate parent for administrative services was a “scheme to direct plan assets to Northrop that were not payments reasonably related to the service the plan need or was provided.”

The complaint also argued that payments to the plan's former record keeper, Aon Hewitt, were excessive. Aon Hewitt was the record keeper from Jan. 1, 2007, until April 1, 2016, when it was replaced by Fidelity Investments. “Defendants failed to properly monitor (Aon) Hewitt's total compensation from all sources in light of the services that Hewitt provided,” said the complaint, adding that the plan paid “unreasonable” administrative expenses to Aon Hewitt.

The complaint alleged that Aon Hewitt received payments from the plan as well as “indirect compensation” from Financial Engines, which was hired by the plan to provide investment advice to participants. Neither Financial Engines nor Aon Hewitt is a defendant.

“We have not been served with the complaint and have no comment at this time,” said Randy Belote, vice president of strategic communications for Northrop Grumman, in an e-mail.

The complaint, Marshall et al. vs. Northrop Grumman Corp. et al., seeks class-action status. It was filed by the lead counsel, Schlichter Bogard & Denton, and local counsel Hill Farrer & Burrill. The complaint said the Northrop Grumman Savings Plan had more than $19 billion in assets as of Dec. 31. The company's headquarters is in Falls Church, Va.; its aerospace systems division is based in Redondo Beach, Calif.