Insurer the target of an ERISA lawsuit

Pension plan participants have filed a class action lawsuit against Mutual of America Life Insurance Company for alleged breach of fiduciary duty under the Employees Retirement Income Security Act.

Plaintiffs alleged that Mutual of America 401(k) plan trustees breached their fiduciary duties of loyalty and prudence to participants by choosing a proprietary closed-architecture record-keeping platform and for failing to monitor or to control the administrative expenses of the plan, the complaint states.

During the course period, “Mutual of America used its own closed-architecture record-keeping platform, requiring participants to pay an annual administrative fee of approximately [10] times what participants would have paid for administrative services had Mutual of America diligently researched the market and engaged a third-party accountant to provide either the same set of services or a higher quality service,” according to the document. judicial.

Plaintiffs brought one count of breach of fiduciary duties of loyalty and prudence against Mutual of America.

“Among other things, Mutual of America caused the plan to pay excessive administrative costs and failed to properly monitor and control administrative expenses, maintaining a proprietary record-keeping platform, as this was in the ‘financial interest of Mutual of America,’ the complaint states.

Additionally, the plaintiffs alleged that Mutual of America failed to use a careful and fair process to select, monitor and remove from the investment lineup the expensive and proprietary Mutual of America funds that underperformed their benchmarks. reference” and gave an inappropriate and unwarranted preference to these funds over superior and cheaper available alternatives.

The plaintiffs claimed that the plan’s fiduciary mismanagement – failure to act in the best interest of participants, as required by ERISA – was “reckless and unfair conduct” and harmed participants by costing millions dollars during the class period.

“Mutual of America failed to act in the best interests of the participants,” the complaint states. “To the contrary, Mutual of America used the plan to promote Mutual of America’s proprietary services and investments and generate profits for Mutual of America.”

The complaint explains that, while the plan’s trustees’ decision to use a proprietary record-keeping platform was not “in itself unwise”, Mutual of America’s selection “significantly limited the investment menu of the scheme and forced scheme participants to pay excessive administrative fees, for the proprietary investment funds in the scheme.”

In 2016, according to the plaintiffs, the plan charged participants $350 per person in average annual fees for administration and record keeping. And in 2020, plan participants paid an average of about $500 per person, the complaint says.

“Based on plaintiffs’ investigation, a prudent and loyal fiduciary of a similarly sized plan could have obtained comparable administrative services for approximately $50-80 per participant – or less – at that time,” they said. argues plaintiffs’ attorneys in the complaint. “It was not prudent or in the best interest of the members to allow the plan to be billed up to [10] times more than this amount.

It is alleged that the Mutual of America plan included 29 exclusive investments, as of the end of 2020 – consisting of an exclusive fixed interest account and 28 exclusive mutual funds – in a menu of 50 investments in total.

“At the end of 2016, the plan’s investment menu consisted of 40 investments, 26 of which were Mutual of America proprietary funds, including a suite of proprietary target date funds and index funds,” the complaint states. . “From 2016 to 2020, Mutual of America has not removed a single one of these 26 proprietary investments from the plan menu. In fact, he added [three] additional proprietary investments, as well as certain non-proprietary investments.

Mutual of America 401(k) plan investments are held in a group annuity contract administered by the company, according to the complaint. Almost all of the investments are mutual funds held in a group annuity sub-account vehicle, a separate account, with the exception of Mutual of America’s proprietary fixed interest account, documents show.

From 2016 through the end of 2020 — the last year for which data is publicly available — the plan had between 1,800 and 2,000 participants and about $274 million to $436 million in assets, according to court documents.

Mutual of America is an insurance company headquartered and incorporated in New York. Mutual of America also provides pension plan services to the small pension market.

The suit is in the U.S. District Court for the Southern District of New York. Minneapolis-based law firm Nichols Kaster is the plaintiffs’ attorney.

Plaintiffs asked the court to certify the class period at any time beginning on September 14, 2016.

In response, Mutual of America told PLANSADVISER, “Mutual of America Financial Group has a long history and extensive experience in providing a competitive range of retirement savings plan products and services to its customers. As a retirement company, we pride ourselves on helping our own employees save for retirement and prepare for a financially secure future. The Company believes that these allegations are unfounded and will defend itself against these allegations. »

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