MassMutual Faces Four ERISA Breach Counts in Retirement Lawsuit

A retirement plan participant has brought a lawsuit seeking class certification against MassMutual, CEO Roger Crandall, its investment fiduciary committee and its plan administrative committee for alleged breach of fiduciary duty to participants in the company’s 401(k) plan.

The plaintiff alleges MassMutual retirement plan fiduciaries mismanaged the plan and violated their fiduciary duties owed to participants under the Employee Retirement Income Security Act, the complaint states.  

“Plaintiff has suffered financial harm and has been injured by defendants’ unlawful conduct,” the complaint states. “In turn, MassMutual has been unjustly enriched from the various fees and expenses generated as a result of plaintiff’s plan investments, and also through the fees charged to plaintiff for recordkeeping services.”

The complaint includes an additional 20 unnamed defendants.

The complaint alleges four separate counts of fiduciary breach, all of which harmed the claimant’s retirement readiness, against the defendants:

• Retaining excessively expensive and underperforming propriety investments in the plan.
• MassMutual plan fiduciaries failing to ensure the plan held the least expensive share class and/or investment vehicle for the defendant-selected investment strategies.
• Plan fiduciaries causing the MassMutual plan to transfer a substantial portion of assets into MassMutual’s general account in connection with the plan’s stable value investment.
• Charging participants unreasonable recordkeeping fees (while attempting to offload the line of business to Empower).

“This conduct ultimately resulted in the plan and its participants and beneficiaries sacrificing tens of millions of dollars in retirement savings through poor performance and above average expenses (for which MassMutual was usually the benefactor),” states the complaint. “Notably, in the past few years, [MassMutual] brought in well over $50 million in compensation directly from the plan’s investment in its proprietary products, all while using the plan as an anchor client to support its marketability and corporate initiatives, like the sale of the company’s retirement business to Empower for $2.35 billion.”

The plaintiff alleges plan fiduciaries breached their duties under ERISA by using the MassMutual Group Annuity Contract to offer investment options to participants. The plaintiff’s excessive fee claims are centered on the Group Annuity Contract, an annuity that guarantees a fixed rate of return for participants.

“Defendants invested plan assets through the MassMutual GAC in order to benefit MassMutual, not the plan’s participants and beneficiaries,” the complaint states. “Through the MassMutual GAC, MassMutual offers a series of proprietary investment products that generate revenue and fees for MassMutual. Moreover, investing plan assets through the MassMutual GAC significantly increased MassMutual’s assets under management, which was beneficial to MassMutual for marketing and other business reasons.”

As of December 31, 2021, MassMutual’s plan had approximately $4.1 billion in assets and 23,662 participants, according to the court filing.

“Had defendants divested from the MassMutual GAC and moved the plan into an unaffiliated structure more typical for mega plans, MassMutual’s efforts to sell its retirement plan business would have been impaired because the plan’s exit would have caused a significant outflow of assets,” the complaint states.

Empower acquired MassMutual’s retirement plan business in 2020.

Additionally, the plaintiff’s complaint claimed “it is uncommon for mega-sized retirement plans—those holding assets of $1 billion or more—to offer investment options through a MassMutual Group Annuity Contract.

The complaint added, “according to a 2019 research paper by PLANSPONSOR, MassMutual does not serve the mega plan market.”

Crandall, the chairman and CEO of MassMutual, is specifically named in the complaint because—as MassMutual is a fiduciary for the plan—the investment fiduciary committee and plan administrative committee are empowered to “appoint and remove members,” the complaint states.

“Given his personal role in appointing committee members, defendant Crandall also had a duty to monitor the committee members, but breached that duty, rendering him similarly liable for all losses to the plan resulting from the unlawful fiduciary conduct that he failed to monitor or address, and other appropriate relief,” according to the court filing. “Given MassMutual’s overall responsibility for the plan, and its authority to appoint and remove committee members and defendant Crandall, MassMutual had a fiduciary responsibility to monitor the performance [of] the committees and their members, as well as defendant Crandall, to ensure that they were performing their fiduciary responsibilities properly and in accordance with ERISA, and to take prompt and effective remedial action in the event that they failed to do so.”

Crandall is chairman of the company’s board of directors and serves as the executive chair of the board’s Investment Committee and Technology & Governance Committee, according to the complaint. Crandall has served as the CEO since 2010, the court filing shows.

Crandall was also responsible for selecting and monitoring the plan’s investment options, controlling investment-related fees and other matters relating to the plan, the complaint states.

“Because Crandall has exercised discretionary authority or discretionary control with respect to management and administration of the plan and disposition of plan assets, he is a functional fiduciary,” the complaint states.

A MassMutual spokesperson said the company will defend itself against the allegations.

“MassMutual is proud to offer our employees and network of affiliated financial professionals generous and competitive benefits that help them secure their future and protect the ones they love,” said the spokesperson in an email. “We comply with all applicable laws and look forward to vigorously defending ourselves against these baseless claims.”

The plaintiff’s attorneys have sought to establish the class period as ranging from December 4, 2016, to the present day.

The complaint was filed in the Western Division office of the U.S. District Court for the District of Massachusetts.