MassMutual settles 401(k) suit with employees for $31 millionPosted On: Jun. 20, 2016 12:00 AM CST
Massachusetts Mutual Life Insurance Co. has agreed to a nearly $31 million settlement in an excessive-fee lawsuit involving the firm's own retirement plans, joining the ranks of other prominent retirement services providers that have settled allegations over their company 401(k) plans.
The class-action lawsuit, Dennis Gordan et al. vs. Massachusetts Mutual Life Insurance Co. et al., concerned two of MassMutual's retirement plans: the $2.2 billion Thrift Plan and the $200 million Agent Pension Plan, in which MassMutual served as record keeper and investment manager.
Plaintiffs, who are current and former plan participants, allege defendants breached their fiduciary duty under the Employee Retirement Income Security Act of 1974 by causing unreasonable administrative fees to be charged to the plans, offering high-cost and poor-performing investments, and offering a fixed-income option that was “unduly” risky and expensive.
Parties to the lawsuit filed a motion Wednesday in the U.S. District Court for the District of Massachusetts seeking preliminary approval of their settlement agreement, which includes a $30.9 million payment by MassMutual as well as certain non-monetary provisions meant to benefit plan participants.
Other firms such as Fidelity Investments and Ameriprise Financial Inc. have settled similar suits alleging excessive 401(k) fees, for $12 million and $27.5 million, respectively.
Non-monetary provisions include, in part:
• using an independent investment consultant, ensuring participants aren't charged more than $35 for standard record-keeping services and not assessing record-keeping fees on a percentage of assets;
• reviewing and evaluating all investment options in the plan; taking into consideration the lowest-cost share class available for each fund, collective investment trust fund and separately managed account alternatives; and passively managed funds for each category or fund offering; and
• considering at least three finalists in making an investment selection.
“While MassMutual denies the allegations within the complaint and admits no fault or liability, we are pleased to put this matter behind us, avoiding the expense, distraction and uncertainty associated with protracted litigation,” spokesman Michael McNamara said in an e-mailed statement. “Importantly, the amount of the settlement is not material to MassMutual's financial strength, nor its 2016 financial results.”
Jerome Schlichter, managing partner at Schlichter, Bogard & Denton L.L.P. and lead attorney for plaintiffs, didn't return a request for comment.
Mr. Schlichter and his firm stand to collect attorneys' fees of up to $10.3 million from the MassMutual settlement. The suit was originally filed in November 2013.
Greg Iacurci writes for Investment News, a sister publication of Business Insurance.