Empower Group SEC Charge: Settlement, Reforms, and Class Action

In August 2025, the U.S. Securities and Exchange Commission charged two Empower affiliates — Empower Advisory Group, LLC and Empower Financial Services, Inc. — with failing to disclose conflicts of interest and making misleading statements when steering government retirement plan participants into a fee-based “Managed Account” service. The two firms agreed to pay nearly $6 million, and all of it is being returned to affected participants.¹

What the SEC Said Empower Did

The order, issued on August 29, 2025, covers conduct from July 2019 through December 2022 inside Empower’s Government Markets segment, the division that serves state and local government retirement plans. The advisors in that segment were dually licensed and could deal with participants as either brokerage representatives or investment adviser representatives. According to the SEC, participants were often not told which role the advisor was playing in a given conversation, and the firms’ written disclosures did not explain the financial incentives behind enrollment recommendations.¹

Those incentives were substantial. Bonuses and merit raises were tied to how many participants an advisor enrolled in the Managed Account service, which charged asset-based fees and was generally more expensive than the participant’s existing arrangement. Some advisors told participants they were “salaried” or “noncommissioned.” Others said they were acting in a “fiduciary capacity” and that enrollment would not affect their pay. In fact, enrollment fed directly into the performance metrics that determined their bonuses.²

The Written Disclosures Fell Short Too

Empower’s formal disclosure documents changed several times during the period but never spelled out the conflict clearly. A 2019 Form ADV brochure said some employees “will have an opportunity to earn bonus compensation” for helping participants enroll. In 2020, the language shifted to say representatives “may be indirectly compensated.” A 2021 version added detail about incentives tied to “achievement of individual performance goals” and asset retention. The SEC found that even the 2021 version was inadequate because it never named the specific Managed Account AUM goal driving those incentives and never told participants the service was typically more costly than the alternatives. The regulator also flagged the word “may” as misleading, since advisors did receive the compensation in question.¹

The advisory affiliate was charged under the Investment Advisers Act of 1940 for engaging in a practice that operated as a fraud or deceit on clients. The broker-dealer affiliate was charged under Regulation Best Interest, the SEC rule that requires brokers to act in the retail customer’s best interest when making a recommendation, and for failing to put written compliance policies in place to address the conflicts its own pay structure created.²

The Settlement and Where the Money Goes

Empower agreed to the order without admitting or denying the findings. The total came to $5,989,969.94:¹

Empower Advisory Group: $4,063,569.80 in disgorgement, $426,400.14 in prejudgment interest, and a $750,000 civil penalty.
Empower Financial Services: a $750,000 civil penalty.

The firms had ten days to deposit the full amount into escrow. A Fair Fund was established under the Sarbanes-Oxley Act to distribute the money to Government Markets plan participants who enrolled in the Managed Account service during the relevant period without adequate disclosure of the conflict. Empower, not the fund, absorbs the administrative costs of the distribution. Both entities were censured and ordered to cease and desist from future violations.¹

If you were enrolled in Empower’s Managed Account service through a state or local government retirement plan between July 2019 and December 2022, you fall within the group the Fair Fund is designed to compensate. Distributions run through a claims administrator set up under the SEC’s order.

What Empower Changed

The SEC credited several steps the companies took before the order was finalized: removing the Managed Account AUM goal from advisor performance metrics, bringing in new senior compliance staff, hiring a third-party consulting firm to review supervisory controls, revamping compliance training, deploying an algorithmic tool to help participants evaluate whether the Managed Account service made sense for them, and requiring advisors to state up front whether they were speaking to a participant in a brokerage or an advisory capacity.¹

A Separate Class Action Is Still Pending

The SEC action is not the only legal matter Empower is facing over its Managed Account program, and the two should not be confused. Two weeks before the SEC order came out, three retirement plan participants filed a class action in the U.S. District Court for the District of New Jersey, Williams-Linzey v. Empower Advisory Group, LLC (No. 3:25-cv-14660). The suit targets similar sales practices but under a different law — the Employee Retirement Income Security Act — and reaches beyond the government-plan population covered by the SEC case.³

The complaint alleges that Empower used its position as a plan recordkeeper to identify high-value targets, particularly participants nearing retirement or holding large balances, and pitched them the Managed Account program under names such as “Empower Premier IRA” and “My Total Retirement.”⁴ The plaintiffs say participants were told the advice was objective and non-commissioned while multiple layers of fees were concealed, and that an investment advisory fee of up to 0.55% of assets, on top of underlying fund fees, could bring total costs to 1.35% of account balances.³ They also allege that the “personalized” advice produced by Empower’s Morningstar-branded software largely just recommended Empower’s own Managed Account service, which then invested in a narrow set of Empower-affiliated funds.⁵

Empower called the case “without merit” and said it would defend vigorously, with a company spokesperson describing the litigation as “driven by lawyers with questionable intentions.”³ After the plaintiffs filed an amended complaint in March 2026, Empower moved to dismiss, arguing that it is not an ERISA fiduciary, that participant data is not a “plan asset,” and that post-rollover IRA investments fall outside ERISA’s fiduciary framework.⁶ As of mid-2026, the court had not ruled on the motion.⁷ Any recovery from that case would be separate from the SEC Fair Fund.

Which Empower Entities Are Involved

Empower Advisory Group, LLC is a registered investment adviser based in Greenwood Village, Colorado, and a subsidiary of Empower Annuity Insurance Company of America, itself an indirect wholly owned subsidiary of Great-West Lifeco Inc.⁸ Empower Financial Services, Inc. is the affiliated registered broker-dealer. The broader Empower organization is the second-largest retirement plan recordkeeper in the United States, with more than $1.4 trillion in assets for roughly 17.4 million participants,³ and its Government Markets segment — the segment at the center of the SEC order — serves over four million government employees across more than 5,000 plans in all 50 states.⁹

1
U.S. Securities and Exchange Commission. In the Matter of Empower Advisory Group, LLC and Empower Financial Services, Inc., Release No. 34-103809
2
U.S. Securities and Exchange Commission. Administrative Proceeding File No. 3-22517
3
Plan Sponsor Council of America. Empower Sued Over Deceptive Sales Practices, High Fees
4
NAPA Net. Schlichter Says Empower Improperly Used Data in 401(k) Managed Account Push
5
BenefitsLink. Williams-Linzey v. Empower Advisory Group, LLC, Complaint
6
Plan Sponsor Council of America. Empower Moves to Dismiss Data Cross-Selling Suit
7
CourtListener. Williams-Linzey v. Empower Advisory Group, LLC, Docket
8
Great-West Lifeco. Empower
9
Empower. Government Retirement Plans