Compliance

Boeing 401(k) Fee Case Sanctioned as Class Action

A federal judge in Illinois sanctioned an excessive 401(k) fee lawsuit against Boeing Co. as a class action.
Reported by Fred Schneyer

U.S. District Chief Judge David R. Herndon of the U.S. District Court for the Southern District of Illinois said the class action litigation would be made up of nearly 190,000 plan participants.

Herndon turned aside Boeing’s claim that the case should not be granted class action status because the allegations the company paid excessive plan fees would require participant-by-participant consideration—making it too difficult to judge the merits of the case collectively.

In addition, Herndon said class certification was appropriate because the lawsuit involved the common issue of whether the defendants selected imprudent and improper investment options for the plan. The court also noted that the lawsuit raised the common issue of whether the administrative fees paid by the plan were reasonable.

The court rejected the defendants’ contention that the class should not include future or past participants. “[T]he Court finds that the inclusion of future class members is appropriate here because Plaintiffs request an injunction prohibiting the continuation of current practices; and this injunctive relief, if granted, would affect not just present participants, but future participants as well,” Herndon wrote.

The lawsuit, one of a group of such cases filed against large employers over the excessive fee issue, was mounted by three Boeing employees who claimed the company breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA) (see Details Reported on Boeing 401(k) Fee Suit).

Adding New Claims

In the suit, the workers alleged that the excessive fees were imposed on the plan through a combination of both hard dollar payments and hidden revenue sharing transfers. The employees further alleged that the defendants breached their fiduciary obligations by not disclosing the fee arrangements.

In December 2007, Herndon allowed the Boeing employees to add new claims to the suit (see Plaintiffs Amend Boeing 401(k) Excess Fee Suit) including allegations that Boeing and the other defendants breached their fiduciary duties by:

  • failing to capture additional compensation streams for the benefit of the plan,
  • including mutual funds in the plan’s investment options,
  • paying for active investment management of various funds offered by the plan.

The case is Spano v. Boeing Co., S.D. Ill., No. 06-0743-DRH, 9/26/08.