Many workers in Texas invest for retirement through their employer-sponsored 401(k) plans. A possible class-action lawsuit emerging against General Electric Co. illustrates the harm caused when plan managers ignore fiduciary duties. Participants in GE's plan, which is one of the largest in the country with over $28 billion in assets, have filed a lawsuit based on violations of the Employee Retirement Income Security Act (ERISA).
Court filings detail plaintiffs' claims about company representatives pushing investments in GE's proprietary mutual funds at company meetings. The lawsuit accuses GE of knowingly urging participants to direct their funds into mutual funds run by GE Asset Management so that GE could earn high profits through investment management fees charged by GEAM. The company promoted five specific mutual funds despite their poor performances. Participants experienced losses of hundreds of millions of dollars while GE earned hundreds of millions of dollars through GEAM.
The lawsuit goes on to assert that GE wanted to inflate the market value of GEAM because the company planned to sell it. On July 1, 2016, State Street assumed ownership of the asset management entity for reportedly $485 million. Prior to the sale, GE also made sizable profits from the fees collected for GEAM services, which were outsourced to investment sub-advisers for lower fees.
The ERISA sets forth regulations that require employers to maintain pensions and retirement plans according to standards meant to benefit participants. A person who has been denied retirement benefits from an employer plan could ask an attorney to handle the grievance. Direct communication with the company by an attorney might correct the problem. Otherwise, an attorney could prepare a lawsuit to pursue rightfully earned benefits.