John Hancock Settles Affiliated 401(k) Fund Suit for $14 Million

John Hancock Life Insurance Co. will pay $14 million to settle a 9,800-person class action challenging the affiliated mutual funds in the 401(k) plan covering its employees, federal court papers filed in Boston show.

The deal requires John Hancock to make several improvements to the retirement plan going forward, including hiring an independent investment consultant to monitor plan investments, developing an investment policy statement for the plan, and hiring an independent consultant to negotiate the plan’s record-keeping services. The settlement payment represents 20% of plaintiffs’ total estimated damages, according to a motion filed Tuesday in the U.S. District Court for the District of Massachusetts.

The lawsuit, led by plan participant Jennifer Baker, claims John Hancock mismanaged its employees’ 401(k) plan by filling it with poorly performing, expensive funds that pay fees to the company. Judge Richard G. Stearns declined to dismiss the case in 2020, and in February John Hancock agreed to litigate the matter as a class action.

John Hancock is one of the dozens of employers that have been sued under the Employee Retirement Income Security Act for putting their own mutual funds in their workers’ 401(k) plans. Other companies signing settlements include Reliance Trust Co. ($39.8 million), McKinsey & Co. ($39.5 million), SunTrust Banks Inc. ($29 million), Fidelity Investments ($28.5 million), BB&T Corp. ($24 million), and Deutsche Bank ($21.9 million).

Baker is represented by Nichols Kaster PLLP and Block & Leviton LLP, which stand to receive more than $4.6 million in attorneys’ fees if the deal is approved. Goodwin Procter LLP represents John Hancock.

The case is Baker v. John Hancock Life Ins. Co., D. Mass., No. 1:20-cv-10397, motion for settlement approval 6/1/21.