Court OKs $16.5M Caterpillar 401(k) Fee Pact

Senior U.S. District Judge Joe Billy McDade of the U.S. District Court for the Central District of Illinois okayed the deal in an order issued Thursday.

According to the order, the agreement calls for the employer not to include retail mutual fund shares as core investment options in the plans, to increase employee communications about 401(k) investment options and their associated fees, and for an independent fiduciary to monitor the plans during a two-year settlement period.

McDade said one factor in his decision to support the pact was his judgment it was ultimately in plaintiffs’ best interest. “Plaintiffs have a hard row to hoe,” McDade wrote. “This litigation entails complicated ERISA claims that are not only dependent on the statute but also on various regulations that implement ERISA. These claims are relatively unique with limited case authority in support.”

Among other allegations, plaintiffs charged the employer committed violations of the Employee Retirement Income Security Act (ERISA) by including the more expensive retail fund shares, thereby unnecessarily driving up plaintiffs’ investment fees.

Caterpillar contended that it had complied with ERISA and that it only agreed to the settlement because it thought the move would be in the best interests of the company and its shareholders (see Caterpillar Ready to Ink $16.5M Fee Suit Settlement).

Last week, General Dynamics agreed to a similar 401(k) excessive fee suit settlement, worth $15.1 million. (see Parties Settle General Dynamics 401(k) Fee Case).