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.

‘Leaching’ Retirement Savings?

Lockheed not only relied on these underwhelming funds but actively promoted them to employees, allegedly misleading workers into believing they were the best—and in some cases, the only—investment choices. The company also automatically enrolled employees into these funds if they failed to make a selection themselves.

With Lockheed’s retirement plans managing $50 billion in total assets for around 180,000 plan participants, the financial stakes are enormous. The lawsuit claims that, instead of removing the underperforming funds in 2019 when their weaknesses became clear, Lockheed expanded their use—introducing new funds for younger employees targeting retirement dates in 2065 and 2070.

"In essence, contrary to what loyal fiduciaries would have done, defendants ran a leaching operation that extracted value from plaintiffs' retirement savings," the workers argued in the filing.

The lawsuit seeks to represent all participants in Lockheed’s retirement plans from March 19, 2019, to the present, aiming to recover the alleged financial losses suffered due to Lockheed’s investment decisions.

Legal Representation and Next Steps

Counsel for the workers and a spokesperson for Lockheed declined to comment.

The workers are represented by:

• Cyril V. Smith, Aaron S.J. Zelinsky, Jason S. Cowart, and Christopher R. MacColl of Zuckerman Spaeder LLP
• Don Bivens and Teresita T. Mercado of Don Bivens PLLC

Legal representation for Lockheed Martin has not yet been disclosed.

With billions in retirement savings and corporate accountability on the line, this lawsuit is poised to become a high-stakes battle over fiduciary duty, financial ethics, and employee rights in one of the largest defense contractors in the world.