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FAIRFAX, Va., - General Dynamics Corporation (NYSE: GD), Fiduciary Asset Management, LLC (FAMCO), and the law firm of Schlichter, Bogard & Denton of St. Louis, Missouri, today announced they have reached a tentative settlement of the lawsuit styled Will, et al. v. General Dynamics Corp., et al., Case No. 06-698. Mr. Will and others, represented by Schlichter, Bogard & Denton, filed a putative class action on behalf of all participants in two General Dynamics 401(k) Plans in the U.S. District Court for the Southern District of Illinois in 2006. The putative class action involved disputes over the fees and management of the 401(k) Plans, which have approximately 85,000 participants and combined assets worth approximately $6 billion.
General Dynamics and FAMCO maintain that they have complied with the Employee Retirement Income Security Act of 1974 (ERISA), which governs the Plans. However, the parties have determined that it is in their best interest, and General Dynamics has determined that it is also in the best interest of General Dynamics’ employees, 401(k) Plan participants and shareholders, to resolve the lawsuit by settlement.
General Dynamics, FAMCO, and FAMCO’s parent company will not contribute to the settlement fund. Rather, pursuant to the terms of the settlement, a $15.15 million settlement fund will be created by General Dynamics’ insurers, and FAMCO’s insurers and other sources. After a deduction for plaintiffs’ attorneys fees and administrative costs for settlement, the settlement fund will be allocated to the accounts of 401(k) Plan participants and authorized former participants based generally upon the number of years a participant maintained an account balance in one or both of the 401(k) Plans.
Under the settlement, the parties also will implement certain practices designed to maximize the returns plan participants receive from their 401(k) Plan investments by continuing to keep the costs of those investments low, including the use of an outside consultant to review certain aspects of the 401(k) Plans and report to General Dynamics and an independent fiduciary, and enhanced disclosures to participants regarding fees and expense associated with their investments. In addition, the settlement provides that General Dynamics will continue its long-standing practices of paying for the Plans’ record-keeping services on a per-participant, rather than an asset, basis, and not providing subsidies to other benefit plans through the 401(k) Plans. General Dynamics also will provide credit to the 401(k) Plans for volume discounts from investment managers who also provide services to other General Dynamics benefit plans. Finally, the settlement precludes FAMCO from recommending itself as investment manager or recommending the allocation of money to investment accounts it manages.
Because the lawsuit is a class action filed under ERISA, the settlement has been submitted to the court for preliminary approval, after which it is subject to a statutory notice period before it can be finally approved. In addition, the settlement must be approved by an independent fiduciary retained to represent the interests of 401(k) Plan participants. The settlement also would establish a dispute resolution procedure with binding arbitration to enforce its terms. Distribution of settlement payments to Plan participants will not begin until the settlement is finally approved by the court.
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