U.S. District Judge Edgardo Ramos granted class status to tens of thousands of Goldman Sachs Group Inc. ex-employees in an ERISA suit related to mismanagement of its employee 401(k) plan. In support of its motion to certify the class, Falberg also pointed to other courts which recently have certified ERISA classes of retirement plan participants suing financial services providers for unfairly promoting proprietary funds in their plans. (For instance, see R. et al. v. Aetna Life Insurance Company et al., case number 3:20-cv-00441, U.S. District Court for the Western District of North Carolina.)
In Falberg et al. v. The Goldman Sachs Group Inc. et al., case number 1:19-cv-09910, U.S. District Court for the Southern District of New York, the former employees, led by ex-IT worker Leonid Falberg, argue that Goldman Sachs promoted their mutual funds to employees, despite their underperformance, instead of better-performing options. These options resulted in more expensive investments for as many as 35,000 workers, and the performance of these options only worsened as time passed.
In 2017, as other financial services firms began to face adverse rulings in court proceedings over pushing proprietary funds on plans, Goldman Sachs finally removed the company-managed investment funds as investment options in the employee 401(k) plan.
The former workers claim that Goldman Sachs breached their fiduciary duties of loyalty and prudence under ERISA by mismanaging their $7.5 billion 401(k) plan. More specifically, the class accuses Goldman Sachs of filling their defined contribution plan with underperforming company-managed investment funds that an independent fund would have rejected due to poor performance.
The former employees also claim that Goldman Sachs participated in illegal transactions when it allowed its subsidiaries to service its mutual funds. They further allege that the company violated ERISA in failing to monitor and evaluate the performance of fiduciaries managing the plan and engaging in “unlawful self-dealing.”
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
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