Another retirement plan services provider has come to terms with participants in its own retirement plan.
MassMutual has agreed to a settlement of $30,900,000 that will be used to pay the participants’ recoveries as well plaintiff’s attorney fees, administrative expenses, and compensation to the workers who brought the class action.
The lawsuit, filed in 2013 by a proposed class of more than 14,000 plan participants, alleged that MassMutual and its top executives violated their fiduciary duties under ERISA, having “larded” the company's retirement plan with “unreasonably priced, proprietary investment options.” The plaintiffs had alleged that the plan fiduciaries were conflicted because of their roles as executives to MassMutual, specifically the CFO as well as the fact that three investment managers from the very products being offered to participants were on the fiduciary investment committee. They took issue with the fact that the plan had 38 investment options, of which 36 to 37 are MassMutual proprietary funds, as well as the fixed income investment included in the MassMutual plan, calling it “unduly risky and expensive.”
In addition to the monetary settlement, MassMutual agreed to (among other things):
- Use an independent consultant who has specific expertise with stable value investments, and to, within one year of the effective date of the settlement will make recommendations regarding the investment structure of the plan’s fixed interest account, “including, but not limited to, considering a general account investment versus a separate account or synthetic model.”
- Make sure that its plan participants were charged no more than $35 per participant for standard recordkeeping services (e.g., excluding charges for unique individual transactions such as loan processing) for a period of four years and beginning no later than six months after the settlement’s effective date.
- Make sure that the fees paid to the plans’ recordkeeper will not be set or determined on a percentage-of-plan-assets basis. That basis has been a point of contention in a number of recent excessive fee lawsuits.
- Identify “those fiduciaries and their job titles shall be identified in an annual participant statement, such as a Summary Plan Description,” where plan committee members reported to MassMutual’s CEO.
- See that its plan fiduciaries “attend a fiduciary responsibility presentation provided by experienced ERISA counsel and an independent investment consultant.”
- Review and evaluate all investment options then offered in the plans, with the assistance of the independent consultant, and to consider “without limitation, (1) the lowest-cost share class available for any particular mutual fund considered for inclusion in the Plans; (2) collective investment trusts and single client separate account investments; and (3) passively managed funds for each category or fund offering that will be made available under the Plans.”
- Consider at least three finalists for any style or class of investment, and if collective investment trusts or separately managed accounts are utilized, to secure most favored-nations treatment for the benefit of the plans.
As for those plaintiff attorney fees (the St. Louis-based firm of Schlichter, Bogard & Denton, LLP)? The settlement calls for “an amount not more than one-third of the Gross Settlement Amount, or $10,300,000.00 as well as reimbursement for costs incurred of no more than $75,000.00.” The seven named plaintiffs in the case were designated to receive $15,000 each.
Commenting on the settlement, a MassMutual spokesman said that “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. MassMutual is proud to continue to extend our award-winning retirement plan services and benefits to our employees and field participants to help them secure their future and protect the ones they love. Importantly, the amount of the settlement is not material to MassMutual’s financial strength, nor its 2016 financial results.”