Mutual of America Agrees to $2.75 Million 401(k) Lawsuit Settlement

Mutual of America and retirement plan plaintiffs have agreed to terms of a proposed settlement, possibly closing for $2.75 million a 401(k) lawsuit brought in 2022, documents show, in Goldstein et al v. Mutual of America Life Insurance Co. in U.S. District Court for the Southern District of New York.

The company and attorneys for the plaintiffs—Eric Goldstein, Matt Sudol and Bonnie Zelazek—on April 14 submitted a memorandum in support of a class action settlement. The lawsuit alleged breach of fiduciary duty to participants of the Mutual of America Life Insurance Co. savings plan under the Employee Retirement Income Security Act.  

The proposed settlement would provide meaningful relief to the plaintiffs if finalized by court, the motion argues.

“This is a significant recovery for the Settlement Class compared to the claims that were alleged, and it falls well within the range of negotiated settlements in similar ERISA cases,” the court filing stated. Going forward, “Defendants will ensure that at least half of the Plan’s investments are unaffiliated with Defendants (i.e., investments not managed by Mutual of America or any of its affiliates or subsidiaries) for the next three years. Defendants have also agreed to retain the Plan’s current net asset value investment platform for the next three years provided, however, that Defendants will not be bound by this if they determine that using the NAV platform is no longer consistent with ERISA.”

Under the proposed settlement’s terms, Mutual of America will direct its insurers to pay a $2.75 million gross settlement amount into a common settlement fund. After accounting for attorneys’ fees and costs; administrative expenses; and class representatives services awards approved by the court, the net settlement amount will be distributed to the eligible class members.

Under the plan of allocation, the net settlement amount will be divided between the recordkeeping claim (25%) and the investment claim (75%), according to the filings. 

The proposed settlement agreement will apply to all participants in and beneficiaries of the Mutual of America Life Insurance Co. Savings Plan at any time on or after September 14, 2016, through the date the court enters the preliminary approval order, excluding any persons with responsibility for the plan’s administrative functions or investments, the motion states.

Mutual of America was alleged to have breached the fiduciary duties of loyalty and prudence by selecting a proprietary, closed architecture recordkeeping platform for the retirement plan. The plaintiffs’ complaint alleged Mutual of America caused plan participants to pay excessive administrative and recordkeeping fees by retaining a proprietary recordkeeping platform and that Mutual of America was imprudent and disloyal in its preference for proprietary funds within the plan, despite the fund’s poor performance and high costs.

The plaintiffs requested that the court approve the proposed settlement agreement, approve proposed settlement notices, authorize distribution of notices to the proposed settlement class, certify that proposal class and schedule a final approval hearing in the case, according to the motion for preliminary approval.

The proposed settlement is pending final court approval at a forthcoming hearing that is yet to be scheduled.   

Mutual of America did not respond to a request for comment on the proposed settlement. 

The class of plaintiffs is represented by lawyers from Nichols Kaster LLP, based in Minneapolis. Attorneys from the law office of New York-based Goodwin Procter LLP represented the defendants.