Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
June 23 — Great-West Life & Annuity Insurance Co. lost another battle in a lawsuit challenging the money it makes off annuity contracts sold to 401(k) investors ( Teets v. Great-West Life & Annuity Ins. Co. , D. Colo., No. 1:14-cv-02330-WJM-NYW, 6/22/16 ).
A federal judge in Colorado certified the case as a class action on behalf of more than 270,000 investors in about 13,600 different retirement plans. The judge also denied Great-West's attempt to block expert testimony on the amount of money at stake in the lawsuit.
“We see this as a big step forward in getting class members the recovery they deserve,” Nina Wasow, a partner with Feinberg Jackson Worthman & Wasow LLP and counsel for the plan participants, told Bloomberg BNA June 23.
Wasow also praised the judge for recognizing that the Great-West investment fund at issue affected all 401(k) plan participants in the same way.
A spokesman for Great-West said the company would continue the fight.
“This lawsuit and the claims it makes are without merit, and we will continue to defend the matter vigorously,” Stephen Gawlik, director of public relations for Great-West, told Bloomgerg BNA June 23.
The dispute centers on the Great-West Key Guaranteed Portfolio Fund, a guaranteed investment contract the company offered to participants in 401(k) plans. According to the plan participants who filed suit, Great-West's ability to unilaterally set the interest rate participants earned off this product allowed it to keep more than $350 million per year in profits that should have been distributed to 401(k) investors. The participants claim this violates the Employee Retirement Income Security Act.
Great-West defended its handling of the fund by characterizing the fund as a “guaranteed benefit policy” exempt from ERISA. This argument failed to persuade Judge William J. Martinez, who denied Great-West's motion to dismiss the lawsuit in spring 2015.
In his most recent ruling—issued June 22—Martinez granted the plan participants' motion for class certification, finding that they satisfied the requirements of rules 23(b)(1) and 23(b)(3) of the Federal Rules of Civil Procedure.
Martinez also denied Great-West's request to exclude expert testimony from Steven Pomerantz, a mathematics professor who frequently testifies in lawsuits involving mutual funds and 401(k) plan investments.
Great-West argued that Pomerantz's method for calculating the fund's profits was “fundamentally flawed” because he failed to consider certain of the company's costs. Martinez found no reason to exclude Pomerantz's testimony on this ground, noting that Great-West remained “free to cross-examine Pomerantz on these issues.”
The participants are represented by Keller Rohrback LLP, Schneider Wallace Cottrell Brayton Konecky, Feinberg Jackson Worthman & Wasow LLP and Law Offices of Scot D. Bernstein PC. Great-West is represented by Sidley Austin LLP and Wheeler Trigg O'Donnell LLP.
To contact the reporter on this story: Jacklyn Wille in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the decision is at http://www.bloomberglaw.com/public/document/Teets_v_GreatWest_Life__Annuity_Insurance_Company_Docket_No_114cv/3.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)