Seven of the nation's largest companies violated pension laws by allowing their employees to be overcharged by the outside firms running their 401(k) retirement plans, according to a series of civil lawsuits.
The employees were charged millions of dollars in excessive management fees, which often were hidden in obscure agreements and not disclosed to the workers, the suits allege.
"At best, these fee structures are complicated and confusing when disclosed to plan participants," claim all the suits, which were filed this month by attorney Jerome Schlichter in federal district courts in Illinois, California, Connecticut and Missouri. "At worst, they are excessive, undisclosed and illegal."
The companies named -- Lockheed Martin Corp., General Dynamics Corp., United Technologies Corp., Bechtel Group, Caterpillar Inc., Exelon Corp. and International Paper Co. -- together have more than 400,000 employees in 401(k) plans, according to the suits.
Spokesmen for Bechtel, Lockheed Martin and United Technologies defended their plans.
"United Technologies Corp. provides a highly cost-effective and successful 401(k) plan," company spokesman John Moran said. "We believe the lawsuit is meritless."
General Dynamics and Exelon declined to comment. Representatives of International Paper and Caterpillar didn't return calls.
The suits seek class-action status.
Schlichter, a St. Louis attorney at Schlichter Bogard & Denton, said his research determined that the companies cared little about what their workers had to pay in fees. In 401(k)s and other so-called defined contribution retirement plans, he noted, employers don't guarantee future payments to workers as they do under traditional, or defined-benefit, plans.
"In a defined benefit plan -- where you get a flat amount per month, no matter what -- the employer has reason to pay close attention to costs and expenses because the employer has to make it up if there's a shortfall," he said. "But, in a defined contribution plan, the risk of return and the cost of the fees and expenses are all on the employee."
In its Retirement at Risk series last spring, The Times reported that hidden fees were quietly eroding the 401(k) nest eggs held by 44 million American workers, and that many companies pay little attention to the costs.
Employee benefits experts say suits targeting 401(k) costs are rare but could become more common as companies increasingly scale back their traditional pension plans -- making earnings from 401(k)s more crucial.
