MassMutual will pay $31M for 401(k) lawsuit
Massachusetts Mutual Life Insurance Co. will pay nearly $31 million to settle a lawsuit claiming that it mismanaged its 401(k) plan, according to recently filed court documents ( Gordan v. Mass. Mutual Life Ins. Co. , D. Mass., No. 3:13-cv-30184, motion for preliminary settlement approval filed 6/15/16 ).
The lawsuit, filed in 2013 by a proposed class of more than 14,000 plan participants, alleged that MassMutual and its top executives “larded” the company’s retirement plan with “excessive fees” and “unreasonably priced, proprietary investment options” in violation of their fiduciary duties under the Employee Retirement Income Security Act. The participants also attacked the fixed income investment included in the MassMutual plan, calling it “unduly risky and expensive.”
Current and former plan participants allege that the defendants breached their fiduciary duty under ERISA; 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 excessively risky and expensive.
In addition to the $30.9 million settlement payment, MassMutual also agreed to non-monetary provisions meant to benefit plan participants.
Non-monetary provisions include, among others:
1) Using an independent investment consultant, ensuring participants are not charged more than $35 for standard record-keeping services and not assessing record-keeping fees on a percentage of assets;
2) 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
3) Considering at least three finalists in making an investment selection.
Content is provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. If you have any questions please call our offices at 920-785-6010.
