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July 19 — New York Life Insurance Co. has been sued by employees who claim that one of the company's in-house mutual funds carried needlessly high fees that eroded their retirement savings ( Andrus v. N.Y. Life Ins. Co. , S.D.N.Y., No. 1:16-cv-05698, complaint filed 7/18/16 ).
In a proposed class action, two New York Life employees accuse the company of lining its own pockets at their expense by offering its MainStay S&P 500 Index Fund in the company's 401(k) plans. The employees say this violated federal benefits law, because the MainStay fund carried fees more than 17 times higher than a readily available alternative from Vanguard.
In particular, the employees allege that none of the 750 largest retirement plans in the country offered the MainStay fund, while more than 250 such plans offered the lower-fee Vanguard Institutional Index Fund. New York Life decided to offer its MainStay fund to further the company's own financial interests and not to benefit the company's employees, they allege.
According to the employees, the 401(k) plan's participants would have saved nearly $3 million in fees over a five-year period had New York Life offered the Vanguard fund instead of the MainStay. The employees seek to represent a class of as many as 25,000 participants in New York Life's 401(k) plans.
The lawsuit was filed July 18 in the U.S. District Court for the Southern District of New York by Minneapolis-based plaintiffs' firm Nichols Kaster PLLP.
In recent months, Nichols Kaster has been very active in bringing lawsuits against large financial companies that include in-house investment funds in their employees' 401(k) plans. The firm is currently representing employees suing Putnam Investments LLC, Deutsche Bank, American Airlines Inc., M&T Bank Corp., and American Century Services LLC.
New York Life employees first sued the company over its in-house mutual funds more than 15 years ago. That lawsuit settled for $14 million in 2008.
Another lawsuit challenging the ways New York Life profits off of other companies' 401(k) plans is pending in the same court.
A spokesman for New York Life said the company was still reviewing the complaint and declined Bloomberg BNA's request for comment.
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Text of the complaint is at http://www.bloomberglaw.com/public/document/Andrus_et_al_v_New_York_Life_Insurance_Company_et_al_Docket_No_11.
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