Washington D.C. Benefits Law Blog

A major defense contractor with employees in Washington, D.C., and across the country is settling a class action suit linked to its retirement plan. Members of Northrop Grumman's 401(k) plan brought a lawsuit under the Employee Retirement Income Security Act (ERISA), a law that protects employee benefits from misuse, mismanagement or violation of fiduciary duties. Members of the plan said that the participants' assets were placed at risk by management decisions, including charging excessive fees and overpaying for plan administration.

The case began in 2006 with allegations that Northrop Grumman's retirement plan was paying excessive fees, wasting employees' retirement funds. While this suit was settled for $16,750,000, it only addressed the issue of excessive charges prior to May 11, 2019. However, they brought a new lawsuit in 2016, saying that they continued to pay excessive fees and that their plan holdings were put at risk by the company's investment choices. However, by August 2019, the case continued with one remaining claim, that the defense contractor violated its duties to plan participants by choosing active management for one of its funds, which is more expensive than a passive management style. By 2014, the company had shifted to passive management for all of its 401(k) plans.

The federal Department of Labor in Washington, D.C., has intervened in a case that could have a significant effect on how workers affected by ERISA protect their rights against plan fiduciaries that make unfair changes. A class-action lawsuit representing terminated employees of Wawa, a large convenience store chain, accuses Wawa, its employee stock ownership plan (ESOP) trustees and plan administrators of violating ERISA, the Employee Retirement and Income Security Act of 1974. The law aims to protect employees from losing their pensions, health insurance, disability insurance and other employee benefits due to plan administrators' misconduct.

According to the lawsuit, Wawa's ESOP amended its plan in 2015, eliminating the previously existing right of terminated employees to continue to hold stock under the program. They also forced terminated employees to accept a liquidation payment for their existing stock holdings at a fixed price, which the complaint alleges sat below market value. They also say that ERISA was violated when plan administrators provided misleading information that led them to lose out when the stock later grew in value.

Under the law, Washington, D.C., employers do not need to provide their workers with employee benefits like disability insurance or retirement plans. However, many workers specifically choose their jobs because of the attractive benefits on offer, and employee benefits can help companies secure the best and most experienced workers. However, once those benefit plans are in place, companies have an obligation under the Employee Retirement Income Security Act (ERISA) of 1974 to handle those benefits responsibly and act according to the workers' best interests. If you are facing serious problems with your benefits, you first need to understand your rights under ERISA.

ERISA requires that certain standards are upheld in the private sector. When benefits plans deprive workers of much-needed claims or squander retirement funds, entire communities of people may be devastated. On an individual level, an unjust disability benefits denial may lead to severe financial suffering for you and others who depend on you. You may be relying on those funds to cover your housing, medical costs or transportation needs, and an unjust denial can leave you struggling to get by or even pay for your medical treatment.

Employees in Washington, D.C., and across the country are protected by the provisions of the Employee Retirement and Income Security Act of 1974, or ERISA. The law contains regulations that require companies with employee benefits plans, including retirement funds, disability plans and health insurance programs, to provide explicit documentation and manage those plans in the best interests of the workers. When companies fail to do so, they can be held accountable in court, and significant damages can be assessed. One case involving the Massachusetts Institute of Technology retirement plan is moving toward a settlement.

Participants in the MIT plan sued the university in an ERISA benefits claim, accusing plan administrators of breaching their fiduciary responsibility to the plan participants. In the settlement, the university will pay $18.1 million to the class of plaintiffs, including covering their legal fees. The settlement funds will be divided among the class members based on how long they were involved in the plan and the amounts they invested. Beyond the financial settlement, however, the document also puts in place a number of specific rules that will govern the behavior of the fiduciaries running the MIT plan in the coming years. The plaintiffs in the case agreed that they would not come back to court on the issues in question in the case.