Northrop Grumman Gets 401(k) Fee Class Action Trimmed

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Northrop Grumman Corp. defeated most claims in a class action challenging its 401(k) plan fees, but individual employees who sat on the company’s benefits committee are still on the hook.

The 21 individual committee members—and not Northrop itself—were the ones who exercised fiduciary control over the 401(k) plan, a federal judge ruled Feb. 15. While Northrop might be liable for failing to adequately monitor these fiduciaries, most of the lawsuit’s claims are properly brought against the committee members and not Northrop itself, the judge ruled.

The lawsuit, filed by seven former Northrop employees, accuses the defendants of charging 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. In 2017, the judge allowed some of these claims to proceed and certified the case as a class action.

This decision comes less than a year after Northrop agreed to a $16.8 million settlement in another class action challenging its retirement plan practices. The two cases, which cover different time periods, were filed by Schlichter Bogard & Denton LLP, the St. Louis-based law firm that’s led the litigation charge against 401(k) plan fees. Schlichter has secured multimillion-dollar settlements with several large companies, including Boeing Co. ($57M), Lockheed Martin Corp. ($62M), Novant Health Inc. ($32M), International Paper ($30M), and Kraft Foods Inc. ($9.5M).

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