In a lawsuit similar to one filed against MassMutual earlier this year, a federal judge has asked for an amended complaint showing that a stable value fund provider set interest crediting rates below actual rates of return in order to make a profit.
In a lawsuit filed last December, John W. Wittman claimed that New York Life Insurance Company has the sole and exclusive discretion to determine the crediting rate for stable value funds offered through retirement plans and sets the crediting rate well below its internal rate of return (IRR) on the invested capital it holds through the funds. By doing so, Wittman alleged, New York Life guarantees a substantial profit for itself. He also claimed New York Life does not disclose to its retirement plan clients and their respective participants the difference between its IRR and the crediting rate, so it collects tens of millions of dollars annually in undisclosed compensation.
However, U.S. District Judge Alvin K. Hellerstein of the U.S. District Court for the Southern District of New York noted that New York Life had complied with the court’s instruction to provide Wittman with a full documentation showing that his “spread” theory was unfounded, and Wittman conceded that the documentation showed there was no spread between the IRR and the interest crediting rate New York Life set for the stable value funds.
“Clearly, without an amendment, the complaint is insufficient and must be dismissed,” Hellerstein wrote in a court order. He ordered that Wittman show by December 9 that he can state a plausible claim for relief and identify documents confirming his claim. New York Life should file its opposition by December 23, and Wittman should file his reply by January 5, 2017.
“However, in response to the judge’s order, the plaintiff agreed to voluntarily dismiss the suit,” a New York Life spokesperson tells PLANSPONSOR.