Court OKs $16.5M Caterpillar 401(k) Fee Pact

A federal judge has given final approval to a $16.5-million settlement of an excessive 401(k) fee suit against Caterpillar, Inc.

Senior U.S. District Judge Joe Billy McDade of the U.S. District Court for the Central District of Illinois okayed the deal in an order issued Thursday.

According to the order, the agreement calls for the employer not to include retail mutual fund shares as core investment options in the plans, to increase employee communications about 401(k) investment options and their associated fees, and for an independent fiduciary to monitor the plans during a two-year settlement period.

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McDade said one factor in his decision to support the pact was his judgment it was ultimately in plaintiffs’ best interest. “Plaintiffs have a hard row to hoe,” McDade wrote. “This litigation entails complicated ERISA claims that are not only dependent on the statute but also on various regulations that implement ERISA. These claims are relatively unique with limited case authority in support.”

Among other allegations, plaintiffs charged the employer committed violations of the Employee Retirement Income Security Act (ERISA) by including the more expensive retail fund shares, thereby unnecessarily driving up plaintiffs’ investment fees.

Caterpillar contended that it had complied with ERISA and that it only agreed to the settlement because it thought the move would be in the best interests of the company and its shareholders (see Caterpillar Ready to Ink $16.5M Fee Suit Settlement).

Last week, General Dynamics agreed to a similar 401(k) excessive fee suit settlement, worth $15.1 million. (see Parties Settle General Dynamics 401(k) Fee Case).

 

Chubb, Law Firm Team up for ERISA Guide

An Employee Retirement Income Security Act (ERISA) law firm and an insurer have teamed up to prepare a guide about ERISA’s fiduciary liability provisions and how fiduciary insurance can help mitigate potential liability. 

Attorneys Charles C. Jackson and D. Ward Kallstrom from the Morgan Lewis & Bockius firm and Alison L. Martin from the Specialty Claims Department of the Chubb Group of Insurance Companies outline the various responsibilities of those associated with pension and benefit programs.

The authors of “Who May Sue You and Why: How to Reduce Your ERISA Risks, and the Role of Fiduciary Liability Insurance” also outline steps ERISA fiduciaries can take both in plan design and administration to protect one’s legal position.

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Some of their suggestions include:

  • delegate fiduciary functions to committees with members who have the expertise and time to properly perform their duties;
  • establish programs to train fiduciaries on their responsibilities;
  • ensure the plan’s fiduciary structure and documents do not conflict with plan practices;
  • review fees and expenses at least annually to make sure the plan is not charged for costs that should be allocated to the plan sponsor; and
  • accurately document all meeting conversations and decisions and recommendations made by outside service providers.

“ERISA class action lawsuits are not confined to the largest employers. Employers and plans of all sizes are vulnerable,” the authors wrote. “Particularly in times of economic transition—when layoffs, workforce adjustments, and corporate mergers and acquisitions are more likely to occur—more plan participants are willing to step forward as ERISA plaintiffs.”

The report is available online at http://www.chubb.com/businesses/csi/chubb12107.pdf.

 

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