Judge Kaufman dismissed a racketeering charge. A New York Life official said at the time that the partial dismissal affirmed that financial companies could invest in their products. But the official did not disclose the withdrawals, which cut the assets of the Eclipse funds by a third. New York Life, which also runs the MainStay family of funds, disclosed the move on Page 232 of a recent 299- page securities filing. How a financial services company treats its retirement plan is a delicate issue.
Federal law requires that retirement funds be managed only for the benefit of workers and retirees.
The class-action suit contends that New York Life has been treating the retirement assets of employees as seed capital to bolster its mutual funds and that the bonuses of several executives were tied to the size of the firm's mutual fund assets. It is rare for a large defined-benefit pension plan, which provides retired employees with a fixed amount of money based on tenure and salary, to invest in mutual funds. As a result, pensions are managed by investment firms for significantly lower fees. Mr. Gottesdiener said that if New York Life had now decided its mutual funds were not good investments for its pension plan, then they were never good investments. George J. Trapp, an executive vice president at New York Life, said the withdrawals were a result of suggestions made by a consulting firm hired in 1999 to appraise the pension.