Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
June 16 — 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.”
In addition to a $30.9 million settlement payment, MassMutual also agreed to keep the plan's annual record-keeping fees no higher than $35 per participant for the next four years. The agreement includes a four-year ban on calculating record-keeping fees as a percentage of plan assets.
This asset-based method of calculating record-keeping fees has come under fire in recent years, with critics arguing that it allows service providers to earn big profits off of large 401(k) plans that are disproportionate to the services provided. Proponents contend that asset-based fees can be appropriate for certain plans, depending on complexity of payroll and composition of workforce.
This case is one of the many lawsuits challenging 401(k) plan fees filed by St. Louis-based Schlichter, Bogard & Denton. In addition to recently filed lawsuits against Insperity Inc., Anthem Inc., Oracle Corp. and Chevron Corp., Schlichter also has obtained multimillion dollar settlements in similar lawsuits against Boeing Co. and Lockheed Martin Corp.
The settlement papers in the MassMutual case provide some insight into how Schlichter approaches these high-dollar lawsuits against large companies and their 401(k) plans. Papers indicate that Schlichter spent more than a year investigating MassMutual before filing the lawsuit, including reviewing public documents, personally interviewing plan participants and "exhaustively" researching the management structure of the plan.
The settlement agreement was filed with the U.S. District Court for the District of Massachusetts on June 15, and it must still receive court approval. The agreement allows Schlichter to seek attorneys' fees as high as $10.3 million.
Goodwin Procter LLP represents MassMutual.
To contact the reporter on this story: Jacklyn Wille in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the motion for settlement approval is at http://www.bloomberglaw.com/public/document/Gordan_et_al_v_Mass_Mutual_Life_Insurance_Co_et_al_Docket_No_313c/4.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)