In a case examining one of the country's largest 401(k) plans, a Missouri appeals court granted class-action status to Lockheed Martin employees and the beneficiaries who participated in the company's 401(k) plan between Sept. 11, 2000 and Sept. 30, 2006.
The Seventh Circuit Court of Appeals ruling overturns a previous denial for class certification by a lower court.
Brought to appeal by attorneys from Schlichter, Bogard & Denton LLP, the case hinges on underperforming investments in the Hueler FirstSource Index. Attorneys argued that Lockheed failed in its fiduciary duty. Plaintiffs claimed that poor management of the stable-value fund was in violation of ERISA standards in that the investments were primarily short-term money market products with lower returns and not in fact properly structured stable-value products.
Recommended For You
Stable-value funds often outperform money market funds, by holding longer-term investments. Benefiting from wrap agreements with insurance companies and banks, the principal is protected from short-term volatility and guaranteed. Industry practice would have stable-value funds invest in a mix of products including Treasury securities, corporate bonds, short and immediate-term securities and even mortgage-backed securities.
Plaintiffs argued that excessive investments in short-term money markets meant a low rate of return that didn't even match inflation.
Lockheed Martin argued the stable-value fund was merely mislabeled rather than mismanaged. The company is not commenting on the case as it appears headed to trial.
"The ruling is a significant victory for 401(k) investors whether or not they were in the Lockheed plan," said attorney Jerome Schlichter, who is arguing the case. "It means that those employees and retirees who lose money from funds that are mismanaged in a 401(k) plan can proceed as a group not just individually."
The Lockheed case is one of several filed by the firm on behalf of 401(k) investors. It specializes in representing 401(k) plan investors, in particular targeting plans with excessive fees. Its recent $35 million Cigna 401(k) plan settlement was the country's largest settlement received on behalf of employees and their beneficiaries.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
