Large Settlements Reached in Two 401(k) Cases

Two of the largest settlement agreements to date have been reached in employee class action suits concerning company stock in their 401(k) plans. Kmart agreed to a $115 million settlement with its employees over declines in its stock price. Workers alleged that the company intentionally misled employees about the state of its finances and imprudently retained all of the company match to the plan in company stock even though executives knew the stock price would fall significantly. The settlement still leaves Kmart executives at risk in ongoing Department of Labor and SEC investigations, however.

The Kmart settlement amounts to only five or ten cents on a dollar. By contrast, employees of Royal Dutch Shell will receive 78% of the estimated value of the loss to their plan assets that they charged resulted from Shell's fraudulent overstatement of its oil reserves. A government investigation of the matter, however, has been dropped. The settlement also requires Shell to pay certain direct costs for attorneys and to make changes to how its plan fiduciaries are selected and trained.