The Detroit News reported that U.S. District Judge Nancy G. Edmunds of the U.S. District Court for the Eastern District of. Michigan gave preliminary approval to the $37.5 million class-action settlement during a telephone conference with lawyers this week. A June 5 hearing has been scheduled when Edmunds is expected to hand down her final ruling on the settlement.
The News reported that the settlement, reached
earlier this month, included plan design changes to which
GM has already agreed – including no longer making
matching company contributions in GM stock or requiring
employees to invest some of their own contributions in GM
GM Settlement of
Company Stock Suit to Include $39M Payment
). At one point, certain employees were required to
invest 50% of their own contributions in company stock in
their 401(k) plan.
The company also agreed to appoint an independent financial consultant to monitor whether it is prudent to allow employees to invest retirement funds in company stock. Those requirements will be in force for four years. According to the News, the settlement covers anyone enrolled in the automaker’s 401(k) plans between March 1999 and May 2006.
Too Much Stock
The lawsuit, filed in 2005, charged that GM invested too
much of its own stock in employees’ retirement funds.
The suit came as the automaker was struggling financially
and its accounting practices were being reviewed by the
Securities and Exchange Commission.
The News said employees will be offered discounted financial counseling services from Ayco, a subsidiary of Goldman Sachs as part of the deal. Employees will pay $30 for the service that normally would cost $200.
About 260,000 employees and retirees were participants in the plans that held assets of $21 billion as of 2003, according to court documents. The plans, with more than $5 billion in GM stock, lost hundreds of millions of dollars when the value of GM shares sank by more than 75%.
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