Boeing is moving to settle a lawsuit accusing it of mishandling its 401(k) plan for thousands of workers. The case is part of a legal assault by a consumer rights attorney to stop companies from offering employees high-cost, bad retirement plans.
Under federal law, employers are required to act in their workers' best interests in retirement plans, though it's not enforced very much by regulators. But Jerry Schlichter, a consumer rights lawyer in St. Louis, has sued a series of companies to force the issue.
It's earning Schlichter the nickname "the 401(k) Lone Ranger."
"Yes, that's what I have been called and I've always represented workers and I see how important it is that workers not be ripped off by their employer in their 401(k) plan," he says.
If a company does right by its workers, it finds low-cost, well diversified, smart investment choices, many experts say. But Schlichter says some companies offer workers mutual funds with fees that are way too high. Sometimes, he says, the companies get kickbacks for that.
And over time, he says, "it's hugely devastating. A 1 percent difference in fees over a 35-year work career makes a 28 percent difference in the retirement assets available to that worker. So this is huge. It may mean that the employee has to extend their work another six or seven years instead of retiring when they wanted to or their lifestyle in retirement is severely hurt."
Schlichter and Boeing aren't commenting on this case because the details are being worked out. Before the settlement, the aerospace giant had said its retirement plan was in keeping with best practices.
Schlichter has sued Lockheed Martin, Ameriprise Financial and six other large firms that have settled for a total of $200 million. About a third goes to the law firm and the rest goes to the affected workers. Schlichter says the settlements also mandated reforms at the companies that are enforced by the federal courts.
All these cases involve big companies. But Ian Ayres, a professor at Yale Law School who researches 401(k) plans, says that smaller employers "tend to have an even larger problem with excess fees."
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