A Michigan federal judge has granted initial approval to a $2.9 million settlement, marking a major development in a class action lawsuit against auto parts manufacturer Magna International. The case accused the company of failing to remove underperforming and overpriced investment options from its 401(k) retirement plan, potentially costing employees millions in lost savings.

Court Grants Preliminary Approval Amid Prolonged Legal Battle

In a 10-page order, U.S. District Judge Nancy G. Edmunds gave the preliminary green light to the settlement, which seeks to resolve claims that Magna violated the Employee Retirement Income Security Act (ERISA). The auto giant was accused of neglecting its fiduciary duty to properly review its retirement plan’s investment options. Both sides presented the deal after reaching an agreement during a settlement conference in May, overseen by U.S. Magistrate Judge Elizabeth A. Stafford.

Judge Edmunds noted that the plaintiffs and their counsel "had sufficient information to evaluate the settlement" and concluded that the deal was "fair, reasonable, and adequate." Without the settlement, plaintiffs faced the possibility of a costly and prolonged legal battle.

Magna Secures OK For $2.9M 401(k) Deal : Timeline for Settlement Approval

The court has set several key deadlines, including an October 14 date for sending settlement notices to the class members. Objections to the agreement must be submitted by December 6, and petitions for attorney fees or class representative awards are due by November 6. A final approval hearing is slated for July 2025, when the settlement will either be fully ratified or face further scrutiny.

Magna Secures OK For $2.9M 401(k) Deal : Missed Opportunities for Better Investments

The lawsuit dates back to April 2020, when a group of Magna employees claimed the company had failed to ensure the financial prudence of its $1.6 billion retirement plan. The workers argued that Magna left poor-performing investment funds in the plan’s lineup despite the availability of lower-cost, better-performing alternatives. They also alleged that the 401(k) plan overcharged participants for recordkeeping services—paying $73 per participant when a more reasonable fee would have been $30.

Class Certification and Legal Representation

Initially, the court hesitated to certify the class, citing concerns that the original lead plaintiffs lacked sufficient knowledge about the case. However, after addressing these concerns, Judge Edmunds certified a 20,000-member class comprised of Magna 401(k) plan participants and beneficiaries dating back to April 30, 2014. The class is now led by former employees Scott Vollmar, Cory Harris, and Bobby Garrett, who have demonstrated their understanding of the claims and the responsibilities of representing the class.

While counsel for the workers declined to comment on Wednesday, Magna International has yet to issue a response. The legal teams representing both sides include prominent attorneys from firms such as Capozzi Adler PC, Muhic Law LLC, Anthony L. DeLuca PLC, Sidley Austin LLP, and Dickinson Wright PLLC.

As this settlement moves toward final approval, it highlights the increasing scrutiny companies face over their retirement plans, emphasizing the importance of fiduciary responsibility in managing employee savings.