401K Lawsuits: MassMutual Settles with Employees for $31M and TransAmerica Settles for $3.8M

Massachusetts Mutual Life Insurance Co. has arrived at a nearly $31M settlement with plaintiffs of a class action securities case. They are accusing the retirement service provider of charging excessive fees in its retirement plans. The 401k lawsuit involved MassMutual’s $200M Agent Pension Plan and its $2.2B Thrift Plan. The settlement includes a $30.9M payment and non-monetary provisions that would benefit participants of the plan.

The case is Dennis Gordan et al v. Massachusetts Mutual Life Insurance Co. et al, and plaintiffs include ex-plan participants and current ones. They are accusing defendants of breaching their fiduciary duty under ERISA through the charging of excessive administrative fees and offering a costly and unnecessarily risky fixed-income choice, as well as investments that were expensive despite not performing well.

The non-monetary provisions of the settlement include the hiring an independent consultant to make sure that plan participants are not asked to pay excessive fees for record-keeping services or record-keeping fees based on asset percentages, a review a of all investment options, and the consideration of a minimum of at least three finalists when making an investment selection.

The settlement has been submitted to a district court for preliminary approval. MassMutual has not admitted to liability or fault despite settling.

It is not the only firm to settle a lawsuit alleging excessive 401(k) fees. Last year Ameriprise (AMP) settled a 401(k) case for $27.5M. Plaintiffs of that lawsuit claimed that they were charged excessive fees that cost them millions of dollars. Also in 2015, Fidelity Investments settled two lawsuits filed by employees for $12M. They accused the firm of excessive record-keeping fees and the inclusion of costly mutual fund choices in its 401(k) plans. The plaintiffs said this violated the etirement plan company’s fiduciary obligation to employees. The firm also did not admit wrongdoing despite settling.

Also this month, Transamerica Corp. settled for $3.8M an excessive fee lawsuit filed by its 401(k) plan participants. The lawsuit is Lequita Dennard et al v. Transamerica Corp. et al. The plaintiffs also alleged breach of fiduciary duty by Transamerica and affiliates under ERISA.

According to the complaint, Transamerica administered its $1.6B 401(k) plan to benefit parent company Aegon and earned excessive fees via revenue sharing payments. Non-monetary provisions include caps on a bond index mutual fund, separate account investments, and S & P 500 fund fees, retention of an investment consultant, a rebate on mutual fund revenue sharing to the 401(k) plan, a rebate on sub-adviser fees for those affiliated with the plan, and free record-keeping services for the plan.

Even though it is settling, Transamerica is not admitting to wrongdoing either and maintains that the allegations have no basis.

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MassMutual Agrees to Settle Excessive Fee Suit, PlanAdviser, June 20, 2016

Retirement plan administrator settles 401(k) suit with own employees, Business Insurance, June 20, 2016

Retirement plan administrator settles 401(k) suit with own employees