MassMutual settles 401(k) suit with its employees for $31 million

The insurer joins other firms such as Fidelity Investments and Ameriprise Financial in settling allegations over excessive 401(k) fees in their own company plans

Jun 17, 2016 @ 11:34 am

By Greg Iacurci

+ Zoom

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 suit, Dennis Gordan et al v. 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 suit filed a motion June 15 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 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;

• 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."

“MassMutual employees and retirees are going to have a great plan going forward, after this settlement is completed," said Jerome Schlichter, managing partner at Schlichter, Bogard & Denton and lead attorney for plaintiffs.

Mr. Schlichter has been a pioneer of excessive-fee litigation in 401(k) plans over the past decade. He secured the largest-ever settlement in such a case last year — $62 million, paid by Lockheed Martin Corp.

He's won other large settlements with companies such as The Boeing Co., Bechtel Corp., International Paper Co., Caterpillar Inc., General Dynamics Corp. and Kraft Foods Global Inc., and won a decision in the first 401(k) fee case to be heard by the Supreme Court, Tibble v. Edison.

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.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

How politics are moving markets

The financial services industry stands at the unique intersection of politics and market fluctuation. Clients are anxious and the right adviser can steady he waters. Scott Kubie of Carson Group explains how.

Video Spotlight

The Search for Income

Sponsored by PGIM Investments

Recommended Video

Path to growth

Latest news & opinion

T. Rowe Price steps up its game to serve financial advisers

The Baltimore-based mutual fund giant is more aggressively targeting financial advisers with a beefed-up wholesale crew and placement on custodial platforms.

The most important tax changes for 2018

The Internal Revenue Service issued inflation adjustments to more than 50 tax provisions for 2018.

Shift to Roth 401(k)s 'highly likely' part of tax reform: former Treasury official Mark Iwry

Mandated contributions to Roth accounts would likely only be partial, as opposed to having a full repeal of pre-tax accounts.

E*Trade acquiring custodian Trust Company of America

Discount broker buying second-tier custodian for $275 million.

Another thousand Dow points higher, and investors yawn

Market milestones keep falling like dominoes, with 51 records broken so far this year.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print