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Sept. 12 — Northrop Grumman Corp. and its executives forced employees to pay nearly $10 million in excessive and largely unnecessary retirement plan fees that went directly to the defense contractor in violation of federal law, a new lawsuit alleges ( Marshall v. Northrop Grumman Corp. , C.D. Cal., No. 2:16-cv-06794, complaint filed 9/9/16 ).
The lawsuit, filed by seven former Northrop employees on behalf of a proposed class of more than 100,000, accuses the company of charging its workers between $1.7 million and $2.1 million per year in administrative fees associated with the company’s retirement plan, even though the plan was already paying millions of dollars in fees to a third-party record keeper. Under this scheme, Northrop executives had “unfettered control” over the amounts taken from the retirement plan, allowing the company to receive plan assets “in the guise of compensation” that wasn’t reasonable or necessary for the plan’s administration, the lawsuit contends.
The Northrop employees are represented by Schlichter Bogard & Denton, the St. Louis law firm that led a decadelong litigation effort against 401(k) plan fees and won multimillion-dollar settlements from Boeing Co., Lockheed Martin Corp. and Novant Health Inc. Last month, the firm made headlines by filing coordinated lawsuits against the retirement plans of 12 prominent colleges, including Yale, Duke and Northwestern.
The lawsuit against Northrop also challenges the fees paid to Hewitt Associates LLC, the plan’s former record keeper. In addition to charging between $37 and $40 per participant for annual record-keeping services, Hewitt also received asset-based kickbacks from another plan service provider that drove the fees paid by the Northrop plan as high as $73 per participant per year, the complaint alleges. According to the lawsuit, a reasonable annual record-keeping fee for the Northrop plan would be no more than $25 per participant.
The Northrop lawsuit also accuses the company of mismanaging the plan’s emerging market equities fund. This fund “consistently and dramatically” underperformed its benchmark, despite being the plan’s most expensive investment option, the lawsuit alleges.
The lawsuit was filed Sept. 9 in the U.S. District Court for the Central District of California.
Northrop didn’t immediately respond to Bloomberg BNA’s request for comment.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Text of the complaint is at http://www.bloomberglaw.com/public/document/Clifton_W_Marshall_et_al_v_Northrop_Grumman_Corporation_et_al_Doc.
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