A federal appeals court said Citigroup Inc was not liable to thousands of workers who said it should not have offered bank stock in its retirement plans because it knew the stock was a bad investment.

The 2nd U.S. Circuit Court of Appeals in New York upheld a 2009 lower court ruling against the workers, who claimed to have lost billions of dollars in their retirement holdings after Citigroup's share price began to tumble in 2007.

In its ruling, the 2nd Circuit said the bank did not abuse its discretion in continuing to offer the stock even as losses began to mount from subprime mortgages and other toxic debt. It also said the bank had no duty to disclose nonpublic information about how it expected the stock to perform.

The 2nd Circuit also upheld the dismissal of a similar case against McGraw-Hill Cos Inc, the financial services and education publisher and owner of Standard & Poor's.

(Reporting by Jonathan Stempel in New York, editing by Gerald E. McCormick)