Notch another win for star attorney Jerry Schlichter. The nemesis of Boeing, Lockheed Martin, Edison International and the 401(k) industry as a whole has settled with MassMutual for $31 million over excessive fee allegations.
The case, Gordan v. MassMutual Life Ins. Co., was resolved at the 11th hour, according to Bloomberg BNA.
“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 news service reports. “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.
MassMutual vigorously denied wrongdoing, but felt it had no choice but to settle.
“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 said in an email statement. “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.”
Schlichter most recently filed a bombshell lawsuit in the stable value space against Chevron Corp., again claiming a fiduciary breach over the latter’s fees charged in its 401(k) plan.
Specifically, Schlichter, managing partner with St. Louis-based Schlichter, Bogard & Denton, claims Chevron only offered money market funds rather than better performing and lower-cost stable value funds as its sole capital preservation 401(k) menu choice.
“ …unlike the vast majority of large 401(k) plans, Chevron failed to offer a stable value fund that would have provided participants the ‘maximum current income’ while preserving capital and liquidity without any greater increase in risk compared to money market investments,” according to language of that filing.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
