MassMutual Plan Participants Sue Over Proprietary Investments

Participants and beneficiaries of the MassMutual Thrift Plan have filed a lawsuit in federal court against MassMutual.

The lawsuit, Gordan v. Massachusetts Mutual Life Insurance Company, was filed in the U.S. District Court for the District of Massachusetts. In the suit, the plaintiffs allege the company was responsible for the retirement plan undergoing financial losses and the fiduciaries benefited from certain investment options offered through the plan. The suit makes several requests of the court, including that it:

  • Find and declare that the defendants breached their fiduciary duties;
  • Find the defendants are personally liable to restore losses to the plan that resulted from such fiduciary breaches;
  • Order the defendants to disgorge all revenues received from the plan;
  • Award actual monetary losses to the plan;
  • Impose a constructive trust on any monies by which defendants were enriched as a result of their fiduciary breaches are returned to the plan;
  • Remove fiduciaries that have breached their duties and prevent them from committing future breaches; and
  • Award plaintiffs and the class their attorneys’ fees and costs.

The defendants are alleged to have “selected and retained [for their employees’ retirement plan] almost exclusively their own proprietary funds on which defendants make a profit and earn unreasonable compensation, without a prudent process for evaluating nonproprietary funds.” The suit also points to the plan containing “unreasonably expensive and imprudent investment options.”

The plaintiffs remind the court that under the Employee Retirement Income Security Act, the fiduciaries of the plan are required to “make decisions regarding the plan that are solely and exclusively in the best interests of the plan, not themselves or MassMutual.” This is especially emphasized with respect to fiduciaries selecting, removing, replacing and monitoring the plan’s investments and service providers.

The suit alleges the defendants repeatedly failed to remove or replace proprietary separate accounts managed and offered by MassMutual, with the funds selected and retained not as part of an impartial or prudent process, but rather were “selected and retained by defendants as investment options in the plan because the defendants benefited financially from the inclusion of these investment options.”

A lack of prudence with regard to pricing and fees for investment options is also cited by the plaintiffs. “Defendants larded the plan with excessive fees and unreasonably priced, proprietary investment options that were and are far more expensive and underperform other comparable investments available to the Plan.” Plaintiffs also point to how “MassMutual provided the administrative services to the plan at multiples above the market rate for the same services.”

MassMutual said in a statement: “We believe the comprehensive retirement benefits we offer our participants help them save toward a secure financial future, and we will defend vigorously against these baseless allegations.”

The full text of the lawsuit can be found here.