GE’s being sued for committing the cardinal sin of investment advisors… self-dealing, aka double-dipping. This filthy act resulted in a $700 Million lawsuit by a number of employees that used the GE 401k between 2011 – 2016. Just to put it into perspective, this lawsuit is seeking greater than 10x the largest 401k lawsuit ever paid. Lockheed Martin paid $62 Million to settle a similar lawsuit in 2016.
Is double-dipping really that bad? When George double-dips in the classic Seinfeld episode, the outraged Timmy makes clear double-dipping a chip, “is like putting your whole mouth in the bowl!” The same chip was never meant to collect two piles of dip and 401k providers are not meant to collect two piles of fees. As Timmy would say, “Just take one fee and end it!”
Another egregious example of double-dipping can be found in Washington DC. Politicians get paid to make decisions that are in the best interest of their constituents. However, all too often their pockets are lined with kick-backs in the form of campaign donations or promises of jobs after their terms are up. These gifts are made to mold legislation that benefit the corporations the lobbyists represent. When politicians double-dip, they have abdicated their responsibility to their constituents.
As an employer, when General Electric offers a 401k to employees there are strict rules to follow. Any employer in this situation must make decisions in the absolute best interest of the employee. It’s called being a fiduciary, and GE is being sued for failing their fiduciary duty in a couple ways:
- Put themselves first, not the employees. The lawsuit alleges the only reason the GE funds were in the 401k was because GE was making money on the funds. There’s probably some truth to this.
- Creatively compensating themselves in two ways: by charging fees to offer the 401k AND collecting fees to manage the investments as well. Here lies the double-dip. The fiduciaries that set up the plan and choose the investments should not get kick-backs on the underlying investments. That creates a question in the investor’s mind as to why the investments were chosen – Was it for performance or the kick-back?
- Mediocre results is allegedly what the employees were subjected to in the 401k. There were better mutual funds available that could have been chosen other than the GE funds. This may be true, but to be fair, my research showed two of the GE funds were actually pretty good. They were inexpensive and performed better than their respective indexes. That’s a win.
Here’s the thing, General Electric is not the only one double-dipping. This kind of behavior is rampant not just in 401ks – advisors do this to individual investors all the time. It drives us crazy.
At Retirement Income Advisors we are double-dip free. In fact, as a way to prove our value and earn people’s trust, we’re offering to do an evaluation of the GE 401k for any GE employee free of charge. We’ll provide our take on each mutual fund in the 401k line-up and offer what we would invest in if we were invested in it. If you’re interested please contact us at:
888-765-4015 or [email protected]
To see what else we’re offering please visit Our Offer and click on Bernie below to learn more about us.
Thanks for reading,
Tim Porter, CFP®
