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401k and 403b Lawsuit Update: Two Cases Settled and One Filed

DC Lawsuits

In what is becoming common place in the rash of 401k and 403b lawsuits, two cases were settled and one new one filed in the span of just one week. Northrup Grumman plan sponsors settled; a case against the Washington University 403b plan was filed; and Merrill Lynch settled claims against it by a plan sponsor.

What is most disturbing is that these cases are now commonplace and THAT the successful settlements will only draw copycat cases perhaps against smaller defined contribution plans which have mostly dodged the lawsuit bullet. On the other hand, these lawsuits are being credited with lowering fees and forcing plan sponsors and providers to be more “prudent” regarding fees and funds as well as overall practices.

There is little doubt that the DOL fiduciary rule effective June 9th will spawn more lawsuits as more parties will be considered fiduciaries albeit with a potential new target: IRAs. Tens of millions of Americans hold IRA accounts with likely targets for lawsuits broker dealers, money managers, IRA providers and perhaps the plan sponsors who may have imprudently selected and monitored them for their defined contribution plans. (See how different defined contribution record keepers are planning to act after the DOL rule.)

Northrup Grumman

The $16.75 million settlement includes two cases filed in 2006 and 2007 respectively alleging that Northrup employees improperly received payments for services provided to the plan. The participants were represented by the Schlichter law firm, credited with launching the wave of lawsuits early on, which has another suit pending against one of the company’s retirement plan.

Merrill Lynch

In this case, the plan sponsor plaintiffs claimed that Merrill Lynch received excessive payments from mutual funds purchased on behalf of participants in the plan. The recent settlement of $25 million comes after Merrill made remedial payments of $79 million earlier. The issue of whether Merrill should be considered a fiduciary was raised by the firm.

Washington University

Washington U is the 15th academic institution targeted since August 2016 with participants claiming excessive fees and poor performing funds as well as inefficiencies caused by the use of multiple record keepers. The original cases had been filed by the Schlichter law firm but the new case was filed by another firm. The university’s 403b plan includes $3.8 billion and 24,000 participants.


Fred Barstein

Fred Barstein

Founder & Editor-in-Chief at 401kTV | TRAU | TPSU
Fred Barstein is the Founder & Editor-in-Chief of 401kTV. Fred is also the Founder and CEO of The Retirement Advisor University (TRAU), a collaboration with UCLA Anderson School of Management Executive Education and The Plan Sponsor University (TPSU).Mr. Barstein was also Founder and Editor-in-Chief of NAPA Net.
Fred Barstein

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