General Dynamics, a $31.9 billion defense contractor, andFiduciary Asset Management Co. (Famco), an investment consultant,have agreed to a $15.15 million settlement in a class actionlawsuit that alleged participants in General Dynamics' 401(k) planswere provided with misleading information about fees.

In a statement released jointly by the two companies and lawfirm Schlichter Bogard & Denton, General Dynamics and Famco saythat they complied with ERISA, the law that governs 401(k) plans,but decided to settle the lawsuit because “it is in their bestinterest.”

The lawsuit, Will v. General Dynamics, involved 401(k)plans with $6 billion in assets and about 85,000 participants.

According to the statement, the $15.15 million settlement willbe funded by General Dynamics' insurers, Famco's insurers, “andother sources.” General Dynamics will also employ an outsideconsultant to review parts of its 401(k) plans. General Dynamicswill also enhance the fee disclosures made to plan participants,continue to pay for the 401(k) plans' record-keeping on aper-participant basis, and credit the plans for volume discountsprovided by investment managers.

The General Dynamics settlement must be approved by the courtand also by an independent fiduciary that represents the interestsof the 401(k) participants, according to the statement.

A spokesman for General Dynamics refused to comment on thetentative settlement.

The suit against General Dynamics and Fiduciary Asset Managementwas one of more than a dozen that the St. Louis-based Schlichterlaw firm filed against large companies in 2006 and 2007. All thelawsuits alleged 401(k) participants were paying excessive fees fortheir retirement plans or had been misled about the costs of theirplans.

Gregory Ash, a partner who specializes in employee benefits atMidwestern law firm Spencer Fane Britt & Browne, notes thatthree 401(k) fee cases have now been settled, and another case,Tibble v. Edison International, was decided last month inthe plaintiffs' favor.

“Overall, plaintiffs' lawyers are starting to get some tractionbut it's still a very narrow, uphill road for them,” Ash says.“They are reaping some benefit for their efforts. But the courtshave established some pretty significant hurdles for them toovercome to win on the merits. And there have also been a number ofdismissals of other lawsuits that have favored defendants.”

Caterpillar, another of the companies sued by Schlichter,settled that lawsuit last November for $16.5 million. And in April,Beverly Enterprises, a Little Rock, Ark.-based nursing homeoperator, agreed to pay $6.5 million to settle a 401(k) fee suitbrought by another law firm.

There have been court verdicts in two other 401(k) cases. Lastmonth, a court found that California utility Edison Internationalhad improperly used retail shares of mutual funds, rather thancheaper institutional shares, for three of the options in its401(k) investment line-up. In 2007, in Hecker v. Deere,Deere prevailed. That case was appealed all the way to the U.S.Supreme Court, which refused in January to review the decision.

For more about Caterpillar's settlement, read CaterpillarSettles 401(k) Fee Lawsuit.