updated 7/3/2005 11:59:11 AM ET 2005-07-03T15:59:11

CVS Corp. has proposed a $3 million payment to settle a class-action lawsuit over its 401K and employee stock-ownership plans.

CVS, one of the nation's largest pharmacy chains, admitted no wrongdoing in the settlement, filed Friday at federal court in Boston. The proposal needs to be approved by a federal judge. A CVS spokesman did not immediately return a phone message for comment on Saturday.

The lawsuit was filed last year by former CVS employee James Fescina. He alleged executives "should have known that CVS stock was an imprudent investment alternative for the (retirement) plan due to the substantial and material accounting and business improprieties occurring at the company."

The investment period covered in the lawsuit runs from Dec. 1, 2000, to Oct. 31, 2001. It's unclear how many people are eligible for payments.

The proposed settlement also requires the Woonsocket-based chain to adopt guidelines for reviewing retirement plan investments. CVS will be required to form a committee to assess investments made with retirement money and advise the company's board of directors about the chain's financial and operational health.

Last month, CVS agreed to a $110 million settlement of a shareholders' lawsuit that accused the company of making misleading statements and violating accounting practices. The company has said that the allegations in the lawsuit were unfounded.

CVS operated 5,409 retail and specialty pharmacy stores as of April 2, the end of the first quarter earnings period.

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