The class action, filed on behalf of 190,000 Boeing employees and retirees, has been in court for almost a decade. On the plaintiffs’ side is a St Louis lawyer known for waging years-long battles over retirement plans. Boeing is his biggest target yet.
The company has vowed to fight the suit, one of only a few such cases to go to trial. Boeing said it “strongly disagrees with the claims” and was prepared to show that its investment options and fees had been in line with industry standards.
Backing the suit is Jerome Schlichter, a personal-injury and civil-rights lawyer who since 2006 has gone after companies for alleged violations of the complex Employee Retirement Income Security Act. Since then, he has filed 18 suits against major corporations over alleged 401(k) violations. The lawsuit against Boeing, filed in September 2006, was one of the first.
Eight settlements have resulted in more than $US214 million ($337m) in payouts, with $US70m of that going to Mr Schlichter and his law firm, Schlichter Bogard & Denton. The settlements also required the companies to make permanent changes to their retirement plan practices. Six of his cases are pending and four others have been dismissed.
As defined benefit pension plans in the private sector are phased out, more Americans have come to rely on 401(k) plans, which allow employees to save pre-tax dollars, for their retirement.
Boeing’s $US44 billion 401(k) plan is the second-largest in the nation after IBM, according to the Labour Department.
The lawsuit, which will be heard in federal court in Illinois, accuses Boeing of failing to uphold its fiduciary duties to employees by allowing excessive fees to go unchecked, choosing higher-cost retail mutual funds over cheaper options, and improperly making 401(k) plan decisions to benefit vendors receiving other Boeing business.
In court documents, the plaintiffs say Boeing employees each paid $US103 for administrative services in 2005, when a plan of its size should have charged no more than $US42. Between 1997 and 2005, the plan overpaid for services by $US35.4m. In 2007, the company reduced its per-employee fees to $US32 after putting out a bid for a new contract.
Source: The Australian