Walmart Stores ( WMT ) settled a long-running class-action lawsuit alleging that the retail giant had breached the retirement benefits of its 2 million past and present workers.
Merrill Lynch, a unit of Bank of America Corporation ( BAC ), was also involved in the lawsuit as it acted as retirement plan administrator to the world's largest private employer, Walmart.
The duo agreed to pay a total of $13.5 million to settle the matter, and also agreed to remove mutual funds that charge high fees and provide more financial education to employees.
However, Walmart employees need to hold on before cheering the news as they would not get the $13.5 million directly. The settlement amount will be used in reducing the future 401(k) plan fees. As for the lawyers, they would get to enjoy $4 million of the settlement amount.
Braden, a Walmart employee in Highlandville, filed a case in 2009 against Walmart. The employee alleged that the retail giant invested in only 10 of the 8,000 mutual funds, for the 1.2 million participants of what is the world's most populous 401(k) plan. They included two low-cost equity index funds and just one bond fund. Moreover, the funds were mostly at everyday retail prices.
A 401(k) is a type of retirement savings account in the United States. The 401(k)s were first widely adopted as retirement plans for American workers in 1980. The 401(k) emerged as an alternative to the traditional retirement pension, which was paid by employers.
Employer contributions with the 401(k) can vary, but in general the 401(k) had the effect of shifting the burden for retirement savings to workers themselves. In 2011, about 60% of American households nearing retirement age have 401(k)-type accounts.
The plaintiff also alleged that the giant investment firm, Merrill Lynch received undisclosed "kickback payments" from outside mutual fund companies simply for allowing them to be in the plan.
Moreover, as per the plaintiff, no changes to the plan investments were made despite the fact that most of them underperformed the market indexes they were designed to track.
Wal-Mart reported better-than-expected second-quarter 2012 results on November 15, with quarterly earnings of $1.09 a share, up 12.4% over the year-ago earnings of 97 cents a share. Reported earnings per share also surpassed the Zacks Consensus Estimate by a penny.