Bechtel settles employee suit over 401(k) costs
Engineering giant Bechtel Corp. agreed to pay $18.5 million to settle a lawsuit alleging that the fees charged to employees in its 401(k) retirement plan were too high.
The class-action lawsuit brought by two former Bechtel employees in California alleged that the San Francisco-based company should have used its massive size to negotiate lower expenses for the more than 17,000 people in its 401(k) plan.
The settlement would mark the latest advance for workers who have brought suits alleging that employers allowed 401(k) providers to stuff plans with high-cost investments, sometimes in exchange for reducing the administrative costs paid by employers themselves. A handful of other companies, including Caterpillar Inc., have settled similar cases.
It’s unclear how much current or former Bechtel employees would gain from the settlement, which must be approved by a federal judge.
The settlement doesn’t explicitly require Bechtel to lower 401(k) fees. And though it would require the company to offer low-cost institutional investment funds rather than higher-priced retail mutual funds, Bechtel already has done that for several years, according to court documents.
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.
After subtracting the maximum possible attorneys’ fees and related costs, the average recovery would be about $600 per employee.
The settlement would require the company to give employees more information about fees. And in an attempt to lower administrative costs, it also calls for the company to seek bids from vendors for recordkeeping services.
“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 Jerry Schlicter, the employees’ attorney.
A Bechtel spokeswoman said in a statement that “we believe this settlement of the long-standing litigation is a desirable outcome for everyone involved.”