Skip to main content

You are here


MFS Excessive Fee Settlement Gets Judicial OK


A federal judge says the terms are a “fair, reasonable, and adequate settlement and compromise of the claims asserted in the Class Action.”

The terms of the settlement (approved on Dec. 5, Velazquez v. Mass. Fin. Servs. Co., D. Mass., No. 1:17-cv-11249, 12/5/19) were announced in mid-June, and news of the settlement itself just before the parties were slated to go to trial. The parties had announced having come to terms last month – just days before the case was set to go to trial. 

The original class action suit, filed more than two years ago, claimed that the MFS defendants “have used the Plans as an opportunity to promote MFS’s mutual fund business and maximize profits at the expense of the Plans and their participants,” and that they had “…loaded the Plans primarily with MFS’s investment offerings, without investigating whether Plan participants would be better served by investments managed by unaffiliated companies.” The suit claimed that those actions “cost Plan participants millions of dollars in excess fees,” alleging that “in 2012, the Plans’ total expenses were approximately 91% higher than the median total costs for retirement plans with between $500 million and $1 billion in assets (the Plans had a combined $515,246,820 in assets as of the end of 2012).”

Settlement Terms

Under the terms of the now-approved Settlement (Velazquez v. Mass. Fin. Servs. Co., D. Mass., No. 1:17-cv-11249-RWZ, motion for settlement approval 6/14/19), MFS will cause its insurer(s) to pay a gross settlement amount of $6,875,000 into a common fund for the benefit of approximately 3,000 Settlement Class Members (approximately 30% of the estimated damages). However, beyond the monetary terms, the settlement also calls for these changes in plan administration, “for a period of no less than three years”:

  • MFS will designate a series of index-fund based Target Date Funds that are unaffiliated with MFS as the Plans’ QDIAs; and
  • MFS will also engage a Third-Party Investment Consultant unaffiliated with MFS to provide an annual evaluation of the Plans’ investment lineup and review the Plans’ investment policy statement. The plaintiffs state that this “directly addresses the main issues that Plaintiffs raised in the lawsuit (alleged self-interested selection of proprietary funds and alleged failure to monitor low-performing proprietary funds and administrative expenses from the Plans), and further supports approval of the Settlement.”

Other Terms

The Settlement Agreement also calls for the plaintiffs’ attorney fees (Nichols Kaster PLLP, Block & Leviton LLP, and MKLLC Law) to be “no more than 25% of the Gross Settlement Fund ($1,718,750), plus litigation costs and Settlement Administration Expenses.” The Settlement also provides for service awards up to $10,000 per Class Representative.

All in all, each participant stands to recover about $2,291, according to the parties’ settlement papers.

To date, a number of firms have reached settlements in cases alleging similar facts, including SEI ($6.8 million), MFS ($6.875 million), Eaton Vance ($3.45 million), Franklin Templeton ($4.3 million), BB&T ($24 million), Jackson National ($4.5 million), Deutsche Bank ($21.9 million), American Airlines Group Inc. ($22 million), Allianz SE ($12 million) TIAA ($5 million), and Invesco (details not yet announced).