MassMutual Accepts Settlement Terms in Excessive Fee Suit

The recordkeeper agrees to pay $31 million to cover claims of excessive fees in its retirement plans.

According to documents filed with the court on June 15, the parties in excessive-fee case Dennis Gordan et al. v. Massachusetts Mutual Life Insurance Co. et al. have reached a settlement and are awaiting court approval.

The motion, filed in District Court for the District of Massachusetts, states that MassMutual has agreed to pay $30.9 million to former and current participants of the MassMutual Thrift Plan and the Massachusetts Mutual Life Insurance Co. Agent Pension Plan, as well as to meet nonmonetary terms, which, over a period of four years, “secure the prudent operation and administration of the plans.”

The original action was filed in November 2013. Plaintiffs alleged “that the plans [had] breached their duties under the Employee Retirement Income Security Act (ERISA) by 1) causing unreasonable administrative expenses to be charged to the Plans; 2) providing unreasonably priced and poor-performing investment options; and 3) providing a fixed-income investment option that was unduly risky and expensive.”

Throughout the process, MassMutual has consistently disputed all claims regarding any alleged breaches or ERISA violations. In an emailed statement, Michael McNamara, a spokesman for the company, said, “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 to its 2016 financial results.”

The settlement, beyond the monetary recovery, requires MassMutual to grant relief to participants by, for example:

  • Ensuring that the plans’ participants are charged no more than $35 per participant for standard recordkeeping services;
  • Employing an independent fiduciary to determine that the settlement meets the requirements of prohibited transaction class exemption (PTE) 2003-39 and is fair and reasonable;
  • Ensuring that fees paid to the plans’ recordkeeper will not be set or determined on a percentage-of-plan-assets basis; and
  • Each year during the settlement period, the plan’s fiduciaries will attend a fiduciary responsibility presentation provided by experienced ERISA counsel and an independent investment consultant.

This case joins other excessive-fee cases against large firms such as Fidelity Investments and Ameriprise, which settled for $12 million and $27.5 million, respectively.

The MassMutual settlement agreement is here.