A news release issued by the two defendants along with plaintiffs’ law firm Schlichter, Bogard & Denton said insurance companies representing General Dynamics and FAMCO “and other sources” will pay the $15.1 million amount. The deal would dispose of the 2006 suit, Will, et al. v. General Dynamics Corp., et al., Case No. 06-698, that alleged the plan paid excessive fees and had committed other fiduciary breaches under the Employee Retirement Income Security Act (ERISA).
According to the settlement announcement, General Dynamics will provide credit to the 401(k) plans for volume discounts from investment managers who also provide services to other General Dynamics benefit plans. FAMCO is precluded under the pact from recommending itself as investment manager or recommending the allocation of money to investment accounts it manages.
Further, the announcement said, the defendants will implement practices “designed to maximize the returns plan participants receive from their 401(k) plan investments by continuing to keep the costs of those investments low.” The plan will use an outside consultant to review the plans and then report to General Dynamics and an independent fiduciary and participants will see enhanced investment fee and expense disclosures.
The news release said the settlement also provides that General Dynamics will continue its “long-standing practices” of paying for the plans’ recordkeeping services on a per-participant basis, rather than an asset basis, and not providing subsidies to other benefit plans through the 401(k) plans.
General Dynamics and FAMCO insisted in the news release that they have complied with ERISA and are only agreeing to the settlement because they believe it is in their best interest to do so.
The pact still must be approved by the court and by an independent fiduciary representing participants.
The General Dynamics plans have approximately 85,000 participants and combined assets worth approximately $6 billion.