Lockheed Martin’s handling of its employees’ 401(k) plans has sparked a legal firestorm, with current and former workers accusing the aerospace giant of self-dealing through a “DIY” investment strategy that allegedly drained hundreds of millions from their retirement savings.
In a proposed class action filed Wednesday in Maryland federal court, workers claimed Lockheed used its subsidiary, Lockheed Martin Investment Management Co. (LMIMCo), to steer assets into in-house investment funds that underperformed significantly compared to independent alternatives. The lawsuit alleges these actions violated the Employee Retirement Income Security Act (ERISA).
Allegations of High Fees and Poor Performance
Rather than entrusting retirement assets to external investment professionals, Lockheed opted for a self-managed approach that, according to workers, prioritized corporate profits over employee financial security.
“Rather than relying on independent investment professionals to fulfill these obligations, defendants Lockheed and its wholly owned subsidiary … chose a ‘DIY’ approach,” the lawsuit states.
The suit claims Lockheed’s target date funds (TDFs)—which are supposed to automatically adjust asset allocations as workers near retirement—”chronically” lagged behind market-leading options from firms like Fidelity, Vanguard, and T. Rowe Price. Over the past decade, comparable funds delivered annual returns ranging from 0.41% to 1.37% higher than Lockheed’s proprietary funds.
Adding to the alleged financial mismanagement, the suit claims the fees attached to Lockheed’s TDFs were two to five times higher than those of Vanguard funds, which consistently outperformed Lockheed’s offerings. Between 2019 and today, workers claim the company has funneled over $150 million into its own pockets through excessive management fees.
