Parties in the longest-running 401(k) fee lawsuit have agreed to a $55 million settlement, bringing to near conclusion a 12-year case that's one of the best-known of its kind.
The lawsuit, Tussey v. ABB, was among the initial tranche of lawsuits attorney Jerome Schlichter brought in 2006, alleging that employers had caused their employees to lose out on retirement savings due to overpaying for 401(k) plan services such as record keeping and investment management.
A cascade of similar 401(k) lawsuits have been filed in the years since, and the trend has increased over the last few years. The Tussey case is one of the only lawsuits of its kind to go to trial. The overwhelming majority either settle or are dismissed pre-trial.
The settlement, reached Thursday, is also among the largest ever paid by a plan sponsor in a 401(k) fee lawsuit. Boeing Co. and Lockheed Martin Corp. settled their cases in 2015, for $57 million and $62 million, respectively.
In 2012, a district court judge in Missouri ordered ABB, a multinational industrial technology company, to pay $36.9 million related to allegations the firm failed to monitor costs of plan record keeper Fidelity Investments, and replaced the Vanguard Group Wellington Fund with Fidelity Freedom Funds.
Since that court order, the Tussey case has been appealed to the Eighth Circuit Court of Appeals on two separate occasions and remanded back to the lower court.
Mr. Schlichter, who represented plaintiffs in the case, said the $55 million settlement, which is still subject to court approval, represents an assessment of what the damages would have been based on the appellate court's rulings.
"We're now pleased to bring this case to an end, for a settlement amount which is substantially more than the original judgment," said Mr. Schlichter, founding and managing partner of Schlichter Bogard & Denton.
Michael Isaac, spokesman for ABB, said plaintiffs' allegations relate to the firm's 401(k) plan management prior to 2006.
"ABB believes it is a fair and reasonable settlement and is ready to move forward," Mr. Isaa said. "ABB values it employees and offers competitive benefits."
Roughly a third of the settlement, $18.3 million, will go toward attorney's fees, and roughly $2.5 million will apply to reimbursement for costs.
In addition to the monetary settlement, ABB will need to conduct a search for record-keeping services, rebate any revenue-sharing fees back to plan participants, and employ the "loyal selection" of 401(k) investments, according to a court document.