$6.55 Northrup Grumman 401k class action settlement

[ccieemeritus]

I get class action lawsuit notices periodically. I've always wondered whether filling out the forms was worth the time.

In October 2017 I filled out the forms for the Northrop Grumman 401k settlement for my wife. The settlement fund was $16,750,000. Lawyers fees/costs of up to $6,823,333 would come out of that leaving $9,926,667 for the 220,000 class members ($45 per person, but distributed based on assets). The 4 lead plaintiffs got up to $25k each.

When filling out the forms I had no idea how much we would get. Due to rollovers and contract-style work (where the contractor bought and sold the government contract) I wasn't certain how much my wife earned for her 401k while at Northrup Grumman. Would failure of others to fill out forms result in hundreds of dollars? Would I miss out if I didn't bother with the form? I filled out the form.

I got a check for $6.55 today. What's worse, unless I roll this over into an IRA, they will send a 1099-R and we will have to treat this as income for 2018 taxes.

Had I known this when filling out the forms, I would not have filled them out. But the 5-paragraph "how much will I get" part of the 2017 notice does not even give a sample award for someone with $100k in the 401k. It just refers to a website for the calculation procedure.

Off-topic comments regarding class action lawsuits in general not put in by ccieemeritus so ladygeek doesn't have to remove them

[liberty53]

I'm not sure from your post what the issue is?

What problem was caused by receiving the settlement?

I received a little over $100 from the same class action settlement a few days ago.

[ccieemeritus]

Its a question of whether it is worth filling out class action settlement paperwork each time I get them in the mail. In this case for me it was not worth it ($6.55), although I didn't know that when submitting. But the fact that you got $100 is useful data, so thanks for the reply.

[liberty53]

I understand.

Most of the class action settlements I have received have been for very few dollars.

The best one I had a few years back was a class action against the credit card companies for high foreign transaction fees. I happened to have been doing a lot of overseas travel the previous years and was able to itemize my credit card transactions and join the class actions with those numbers. I received a few thousand from that one.

In many cases when receiving the class action paperwork one is able to get a fairly good estimate of the upper and lower award amounts. Assume the lower amount and then decide if the few minutes of time filling out the paperwork is worth it.

[JoMoney]

Interesting... I have a 401k that also received a class action settlement (different case than yours). In my situation the 401k itself was the beneficiary and the (trivial) amount was deposited directly into the account and shows in my (Fidelity administered) account as a "Settlement Allocation" source that amounts to 0.00% of my balance

[TravelGeek]

Its a question of whether it is worth filling out class action settlement paperwork each time I get them in the mail. In this case for me it was not worth it ($6.55), although I didn't know that when submitting. But the fact that you got $100 is useful data, so thanks for the reply.

I always participate and hope others are too lazy, thus increasing my share.

How much time did you spend on this one? Did you still earn minimum wage on the effort?

[ccieemeritus]

How much time did you spend on this one? Did you still earn minimum wage on the effort?

It was not much time. I did not have to report the number of shares or balance or anything. They had an online form so I didn't have to physically mail anything in. But I not earn minimum wage either.

[Chicago60]

The Class Action Administrator likely had all of your information so your time to complete the form in this instance was minimal. Accordingly, it probably took you less than 5 minutes to complete the claim form. I suspect you can figure out the hourly rate for your time, but you've concluded it was not worth it to you. It is always worth it to me--though I was not a class member for this case-- because I appreciate the check on the system that class actions provide, and I feel I am rewarding and thanking class counsel for their efforts by taking the few minutes to complete the necessary paperwork. Class counsel no doubt collectively spent thousands of hours working on the case.

[chevca]

Congrats, that $6.55 should be the tipping point to reach FI.

The few times I've gotten class action paperwork, I am too lazy and don't bother. Mostly, I figure it will be just a few dollars, so why bother.

[munemaker]

From past experience, I usually do not participate in these class action suits. They are a good deal for the lawyers, but usually not anyone else.

Often you get a coupon or discount for purchase from the company that caused the problem to begin with.

[Badger1754]

I once was part of a class action settlement regarding a company that had gone bankrupt.

Through some small miracle, there was still some nominal residual value left in the company equity.

I calculated that it would cost more for the stamp that I would have to put on the envelope to mail in my claim than the payout for my near-worthless shares would be.

[Duckie]

I got a check for $6.55 today. What's worse, unless I roll this over into an IRA, they will send a 1099-R and we will have to treat this as income for 2018 taxes.

They are not required to send a 1099-R for distributions under $10. But it's still income.

[Pajamas]

From past experience, I usually do not participate in these class action suits. They are a good deal for the lawyers, but usually not anyone else.

Often you get a coupon or discount for purchase from the company that caused the problem to begin with.

I always participate. One settlement involving fraudulent behavior by officers of the company paid many thousands of dollars in three or four checks over a period of several years. Not participating is simply allowing the people who do participate to get your share.

So thank you so much and please continue refusing to participate!

[D-Man]

My Mom told me she was getting a check for $160.

[framboise]

I always participate because you never know. One time I got a $5 credit from a Groupon settlement — I never ended using it before it expired. Another time I got several thousand dollars from a magazine publisher for a few unpaid internships I did after college.

[Chadnudj]

Its a question of whether it is worth filling out class action settlement paperwork each time I get them in the mail. In this case for me it was not worth it ($6.55), although I didn't know that when submitting. But the fact that you got $100 is useful data, so thanks for the reply.

I'm biased as an attorney who works on the plaintiffs' side, but let me just say that in general filling out class action settlement forms for classes that you are eligible for IS worth it.

Sure, $6.55 may not seem like much to you (and it likely isn't). But class action settlements (or class actions generally) are a way to keep companies honest when they do something wrong, and as a deterrent against other companies doing something wrong. If you let a company rip you off for $6.55, that may not be a lot to you....but if they do it to a million people? 10 million? 20 million? Or it's $6.55 a month that they're ripping you and 1 million other people off by for 12-24 months?

Now you're starting to talk about some significant amounts of money in the aggregate, even if it's not that much to you individually. Filling out those forms keeps those companies a bit more honest, which is why you should do it, IMHO. Your mileage may vary, of course.

[JBTX]

I once received a class action settlement notice against an insurance company for a particular medical therapy rejected by insurance company. I filled it out, (luckily I had kept records from 5+ years prior) even called and talked to the lead attorney. I expected to get maybe $4000. Ended up getting $20,000, the entire amount I filled out. Then later got another $1500 residual Allocation payment. It was a small class action, and perhaps the claims came in less than expected.

Also got one from Justice, a teen clothing store. Using quicken records and old credit card statements I submitted claim that resulted in about $400 paid out.

[Chicago60]

The lawyers always get millions of dollars in payment... It isn't like they are altruistic public defenders or volunteers.

(emphasis mine) This is flatly untrue. First, the lawyers took the case on a contingency basis. If they were unsuccessful, they received nothing, and likely incurred on average hundreds of thousands of out of pocket expenses that were never reimbursed. Many many cases are dismissed or lost with no recovery. Second, many class action settlements yield less than $1 million in settlement, and therefore much less in any payment for the attorneys. Finally, and most importantly, every class action settlement must be reviewed and approved by the judge assigned to the case, including any payment of attorneys fees.

Of course the lawyers in most class actions hope and expect to be paid. At times they handle them pro bono, but that is rare. I assume you too hope and expect to get paid for the work you do.

[magicrat]

OP - Don't get discouraged by the small amount. Just imaging how much it will be worth in 30-50 years if you invest it in VTSAX (I suggest lump sum instead of DCA).

[evofxdwg]

Who hoo! My NG settlement check was $168.28. But it was made out to "Vanguard FBO [my name]".

When I filled out the form I think I provided a Vanguard IRA sweep account number and I assumed it would be direct deposited elected to roll it over and provided Vanguards address. I had no idea I guess if it would come to me or go direct. But Noooooo! Now I can't just deposit it in my local checking account and pay the taxes. I must go thru the hassle of sending it to Vanguard.

And its not even clear to me if it should be treated as a rollover (tax deferred) or taxable income or non-taxable income? Aren't court settlements exempt from tax? I didn't see any instructions in the original form or the check envelope.

ccieemeritus: where did you get the info about a 1099R?

(Edited above after I looked at my copy of the class action forms sent in)

[Mako]

And its not even clear to me if it should be treated as a rollover (tax deferred) or taxable income or non-taxable income? Aren't court settlements exempt from tax? I didn't see any instructions in the original form or the check envelope.

Settlements of tort claims generally aren't taxable because of the notion that they are just making you whole, not making you new income. (ETA: it's more complex than just this simple statement, but good enough for this discussion)

This seems different because it is making your 401k whole, so it should stay in a tax advantaged account. If you take the money for yourself in your regular account it is the same as taking it out of your 401k, thus the tax consequences.

[PhrugalPhan]

I got a check for $6.55 today. What's worse, unless I roll this over into an IRA, they will send a 1099-R and we will have to treat this as income for 2018 taxes.

I just sent my settlement check to my 457 plan yesterday for $7.06. Thankfully where I work they have a someone from the plan administrator to help with this - I had them fill the paperwork out way back when so I got it made out to "T Rowe Price FBO PhrugalPhan". They also gave me a prepaid envelope, so I will get to have all $7.06 power my retirement. Woohoo, I'm rich.

That said, I remember reading the numbers on the original paperwork and thinking I will be lucky if I get $5. I got lucky - sorta.

[2015]

Its a question of whether it is worth filling out class action settlement paperwork each time I get them in the mail. In this case for me it was not worth it ($6.55), although I didn't know that when submitting. But the fact that you got $100 is useful data, so thanks for the reply.

I'm biased as an attorney who works on the plaintiffs' side, but let me just say that in general filling out class action settlement forms for classes that you are eligible for IS worth it.

Sure, $6.55 may not seem like much to you (and it likely isn't). But class action settlements (or class actions generally) are a way to keep companies honest when they do something wrong, and as a deterrent against other companies doing something wrong. If you let a company rip you off for $6.55, that may not be a lot to you....but if they do it to a million people? 10 million? 20 million? Or it's $6.55 a month that they're ripping you and 1 million other people off by for 12-24 months?

Now you're starting to talk about some significant amounts of money in the aggregate, even if it's not that much to you individually. Filling out those forms keeps those companies a bit more honest, which is why you should do it, IMHO. Your mileage may vary, of course.

Having just finished The Golden Passport which does an excellent job of detailing the historical litany of illegal/unethical dealings of Harvard MBA's while running the largest country's organizations, I can't agree. It's like listening to Zuckerberg saying FB's personal data mishandling was "my mistake". No, it wasn't. It was a choice and they took that choice for as long as they could get away with it. A reading of the book Fraud An American History demonstrates that fraud--big and small--will always be present in business and government, the added systemic friction of class action litigation notwithstanding.

[Chicago60]

Settlements of tort claims generally aren't taxable because of the notion that they are just making you whole, not making you new income. (ETA: it's more complex than just this simple statement, but good enough for this discussion)

This seems different because it is making your 401k whole, so it should stay in a tax advantaged account. If you take the money for yourself in your regular account it is the same as taking it out of your 401k, thus the tax consequences.

I think this is actually generally incorrect in this context. I think generally class action settlements in shareholder disputes either are taxable, or reduce your basis depending on the circumstances of the case, and your own specific circumstances. I agree, in the context of a 401K plan (or the like), if your share of the settlement funds are deposited into the 401K account, it stays tax advantaged until withdrawn.

[Bg401313]

I would like to follow up on this, has anyone who is a current plan participant received their settlement yet?

Per the documentation we received we were supposed to receive the settlement in the first 1/2 of 2018..

The timing of the distribution of the Net Settlement Amount is conditioned on several matters, including the Court’s
final approval of the Settlement and that approval becoming final and no longer subject to any appeals in any court. An
appeal of the final approval may take several years. If the Settlement is approved by the Court, and there are no appeals,
the Settlement distribution likely will occur during the first half of 2018.

[NillaNumberNine]

I am a current plan participant and don't recall any notice of settlement for myself yet. If I recall correctly, we didn't have to fill out anything, it was automatic if you have an active 401k with NG, correct?

[Bg401313]

I am a current plan participant and don't recall any notice of settlement for myself yet. If I recall correctly, we didn't have to fill out anything, it was automatic if you have an active 401k with NG, correct?

Correct, and as I read the paperwork we did not have to do anything for the settlement. I have an email to the settlement administrators out and may call them tomorrow.... Seems odd that non current participants receive their payments last quarter but current plan participants have not...

[NillaNumberNine]

I am a current plan participant and don't recall any notice of settlement for myself yet. If I recall correctly, we didn't have to fill out anything, it was automatic if you have an active 401k with NG, correct?

Correct, and as I read the paperwork we did not have to do anything for the settlement. I have an email to the settlement administrators out and may call them tomorrow.... Seems odd that non current participants receive their payments last quarter but current plan participants have not...

I was wondering if you ever got a response.

[Bg401313]

I have not, I think I will try calling the telephone number listed in the notice today...

[Bg401313]

So I just called and spoke with the claims administrator, they said they do not have any updated as to when current participants will be paid out...

I will check back in a month or so...

[Broken Man 1999]

OP - Don't get discouraged by the small amount. Just imaging how much it will be worth in 30-50 years if you invest it in VTSAX (I suggest lump sum instead of DCA).

Wife and I have received our settlement from SeaWorld Entertainment. Two bags of popcorn for each of us. Woo Hoo!

Oh well next time we go to Busch Gardens the whole family can enjoy free popcorn!

Broken Man 1999

[sco]

I fill them out, most of the time it is a small check that is a pain. Once it was $2,000 and was over a year after the paperwork was sent in. I forgot about it, and it was a welcome surprise.

[Bg401313]

Just a minor update, I called the settlement administrator again today and they still had no information on when the claim would be paid out to current participant members. They did agree that payment had been made to former members.

[NextMil]

I don't fill out class action lawsuits because I don't like the business. Most of the time, the law firms just go hunting for an opportunity. In the case of the Northrup Grumman case, the same firm has gone after a bunch of other companies. They find a case, sign people up, and they take a huge chunk of the wins, and everyone else gets pennies. Meanwhile share price of that and a bunch of other companies take a hit. No thanks.

[Bg401313]

I don't fill out class action lawsuits because I don't like the business. Most of the time, the law firms just go hunting for an opportunity. In the case of the Northrup Grumman case, the same firm has gone after a bunch of other companies. They find a case, sign people up, and they take a huge chunk of the wins, and everyone else gets pennies. Meanwhile share price of that and a bunch of other companies take a hit. No thanks.

All of the current plan participants were included in the suit unless we specifically opted out by a certain date, so its not like we signed up. I find it odd the former members were paid out back in March but there is no information on when current plan members will be paid out.

[Bg401313]

So I have a good update for the Current participants!

I finally emailed the law firm involved in the case asking for status on the claim payout for current participants.

As it turns out I was paid out back in July, it shows up as “Change in Market Value” under your transactions.
There is no separate indication of this in the Quarterly statement as it is included with the normal change in market value section.


Funny the claims administrator was not able to tell me the status of my claim...

[N10sive]

It is funny how most of the replies state they don't fill out the class action because of the payout. In this class action it was brought up because of high administrative fees that possibly went back to NG. In this same instance why then is the common theme that the lawyers get a large portion of the settlement, thus leaving dollars to most of the participants. In the end, the majority of the class action people lose either way. I am sure $6.55 wasn't nearly close to the money spent on those high administrative fees.

[barbhume]

We received our $189 check mid-2018 and I deposited it.

1. Should that have been deposited into a tax-advantaged acct? Comments above seem to indicate yes but want to confirm.

2. Can I just deposit $189 into our tax advantaged acct by Apr 15, to avoid the extra taxes? Or is there a "rollover" protocol that I should have used and didn't? 1099-R shows an early distribution.

Thanks in advance!