The suit was filed in 2005 after Detroit-based GM’s shares plunged 75 percent, causing GM employees and retirees to suffer substantial financial losses in their 401(k) plans. The agreement enforces changes that GM has already made to its 401(k) plans, which includes GM no longer matching employees’ salary deferrals with GM stock or requiring employees to invest some of their own 401(k) plan contributions in GM common stock.
Also as part of the agreement, retirees will be offered discounted financial counseling from Ayco, a subsidiary of Goldman Sachs, for which employees will pay $30 for a year of advising services. This type of service usually costs employees around $200. GM has agreed to pick up the balance for those employees who elect to participate in this program.
U.S. District Judge Nancy G. Edmunds will hold a hearing to grant preliminary approval of the settlement. That hearing date has not yet been scheduled.
Several charges were filed against GM in the suit, including that it “breached fiduciary duties in violation of the Employee Retirement Income Security Act of 1974” and “failed to provide participants with complete and accurate information regarding stocks and the true risks of investing,” according to court documents.
GM’s poor financial state was disclosed in a 2003 filing with the Securities and Exchange Commission, which promptly launched an investigation into the automaker’s accounting practices.
According to court documents, 260,000 employees and retirees were participants in plans that held assets of $21 billion as of 2003. The settlement covers anyone enrolled in GM’s 401(k) plans between March 1999 and May 2006.