The assets from the 401(k) plan were not invested in a separate account, but rather they were commingled with the Great-West's general investments. The insurer guarantees that the returned quarterly interest rate can never be less than 0.0 percent.

Great-West charges fees for managing the Group Annuity Contract, and also takes a cut of profits from plan asset investments if they return more than the quarterly interest rate.

That is a problem with Teets, and the potential class of claimants, which could potentially extend to all participant assets managed in Great-West's Group Annuity Contracts.

Not only is the 0.0 percent interest rate floor "artificially low," according to court documents, but the revenues claimed by Great-West when returns beat set interest rates constitute excessive fees, alleges the plaintiff.

That's a clear violation of ERISA's excessive fee clause, claims Teets, as are the self-dealing transactions Great-West engaged in as a fiduciary to the plan.

Teets' claim also alleges Great-West violated ERISA by encouraging prohibited transactions with the plan's in-house trustees.

Great-West moved to have each claim dismissed on the grounds that it was not a fiduciary in the relationship.

That's because the Group Annuity Contract falls under the so-called guaranteed benefit policy exemption in ERISA.

The GBC clause exempted Great-West from being a fiduciary because of the guaranteed return on plan assets, according to the insurer's interpretation of the clause.

The exemption allows third parties to invest plan assets at their discretion without breaching ERISA's fiduciary standards, so long as the guaranteed return is provided.

But in John Hancock v Harris Trust and Savings Bank, a case the Supreme court heard in 1993, the High Court found that in order to meet the GBC exemption, third-party insurers of plan assets must "guarantee a reasonable rate of return," and that if returns on the plan are allowed to fall to 0.0, as they were in the agreement with Great-West, then participants are "undeniably at risk."

In its motion to dismiss the case, Great-West failed "to distinguish the explicit guidance of the Supreme Court" in the Harris decision.

Moreover, because Great-West had discretion in setting the rate of return, which court papers reveal never actually fell as low as the 0.0 percent guarantee, the service provider was acting as a fiduciary under ERISA's definition of the term.

Judge William Martinez did grant Great-West's motion to dismiss the plaintiff's claim that the insurer engaged in prohibited self-dealing transactions, but only on a technicality. The plaintiff is allowed to amend that claim, according to court documents.