A Los Angeles Times news report said the agreement would end proceedings in a class-action case filed by two former Bechtel employees in California who alleged the company violated its Employee Retirement Income Security Act (ERISA) fiduciary responsibilities by not using its size to get lower fees from vendors (see Case Sensitive:”Outside” Interests). Bechtel has more than 17,000 401(k) participants.
The settlement still must be approved by a federal judge.
According to court papers, Bechtel has agreed for a three-year period to:
- not use any of its own affiliates to act as the investment manager for the 401(k) plan,
- greatly enhance the disclosures it makes about investment and recordkeeping fees,
- not offer any retail mutual fund as an investment option and prohibit all of the plan’s separate account investment managers from investing in retail mutual funds,
- not use plan asset-based pricing for recordkeeping service fees,
- conduct a competitive bidding process for recordkeeping services when the plan’s current contract with J.P. Morgan Retirement Plan Services expires, which is scheduled to occur no later than 2012.
Depending on how long they’ve been with the company, employees would receive a portion of the settlement proceeds as a credit in their accounts. Those no longer in the plan would receive checks.
“Going forward, Bechtel employees will have a state-of-the-art 401(k) plan with real benefits and a clear, understandable explanation of fees,” said Jerome Schlicter, the employees’ attorney, in a statement, according to the Times. A Bechtel spokeswoman said in a statement that “we believe this settlement of the long-standing litigation is a desirable outcome for everyone involved,” the newspaper reported.
The Bechtel pact is the latest in a string of such settlements that have included Caterpillar (see Court OKs $16.5M Caterpillar 401(k) Fee Pact) and General Dynamics (see Parties Settle General Dynamics 401(k) Fee Case).