The payout represents the “largest ever in an ERISA case alleging a retirement plan improperly offered proprietary funds,” according to the plaintiffs.

Published Oct. 13, 2023 by Ryan Golden

Dive Brief:

• General Electric will pay $61 million to settle a class-action lawsuit brought by participants and beneficiaries of its 401(k) retirement plan, according to court documents filed Oct. 6.
• The settlement concludes nearly six years of litigation stemming from a complaint filed in the U.S. District Court for the District of Massachusetts in 2017. The plaintiffs alleged GE breached its fiduciary duties under the Employee Retirement Income Security Act by limiting actively managed funds available to participants to a group of five funds that were managed by a wholly owned subsidiary of GE.
• The funds at the center of the suit also “substantially underperformed” other comparable investment options, and GE refused to consider replacing the funds or their managers, the plaintiffs alleged. Per the settlement terms, GE denied all claims and allegations of wrongdoing.

Dive Insight:

In their motion for approval of the settlement, the plaintiffs claimed that the $61 million payout represents the “largest ever in an ERISA case alleging a retirement plan improperly offered proprietary funds.” Additionally, a plaintiffs’ damages expert calculated the reasonable recoverable damages in the range of $283 million, the plaintiffs said.

The settlement total nonetheless represents approximately 21.5% of the figure cited by the plaintiffs, “which is at the higher end of settlement recoveries approved in other ERISA class action settlements,” according to the motion.

ERISA requires persons or entities who exercise discretionary control or authority over retirement plan management or assets to uphold fiduciary responsibilities. Such responsibilities include running the plan solely in the interest of participants and fiduciaries and diversifying plan investments in order minimize risk, according to the U.S. Department of Labor.

Recent years have seen retirement plan litigation settled for similarly high dollar amounts. In July, DOL announced that one investment management firm would pay upwards of $124 million to settle allegations that it mismanaged an employer’s 401(k) plan through a “self-proclaimed strategy of non-diversification,” resulting in losses for more than 9,000 participants.

In 2022, the agency settled with Wells Fargo, which agreed to pay $145 million over claims the bank overpaid for preferred stock. That same year, DOL sued the owner of a New Jersey-based design firm for allegedly using plan assets to invest in a bank owned by the owner’s spouse. The defendants in that case entered a consent order with DOL in which they agreed to pay more than $1.8 million to plan participants.

***** ***** ***** ***** ***** 

Source: HR Dive

https://www.hrdive.com/news/general-electric-401k-settlement-fiduciary-class-action/696607/