Massachusetts Mutual Life Insurance Co. is free of a lawsuit claiming the company received tens of millions of dollars annually in secret profits from the retirement plans it services.
The lawsuit, filed in 2016 on behalf of a proposed class of “hundreds” of retirement plans, is barred by a $9.5 million class action settlement from 2014, Judge Mark G. Mastroianni of the U.S. District Court for the District of Massachusetts held Feb. 5.
Retirement plan investor Deborah Bishop-Bristol said her lawsuit was viable because MassMutual breached the settlement agreement by failing to disclose the “spread” it makes from the stable value fund in her 401(k) plan. Mastroianni disagreed, saying the settlement required only the disclosure of the revenue MassMutual made off each fund offered to retirement plan investors.
Both cases accused MassMutual of manipulating the rate paid by its stable value funds in order to collect undisclosed profits. Stable value funds, which are low-risk investments that provide a modest, guaranteed rate of return, have been challenged in several class actions by investors who say they allow financial companies to set their own compensation by keeping the undisclosed “spread” between the amount paid by the fund and the amount earned off the underlying investments.
MassMutual wasn’t required under the terms of the 2014 settlement to disclose this spread, Mastroianni said. Because the company wasn’t in violation of the settlement, the deal remained in full force and blocked Bishop-Bristol from raising her claims in court, Mastroianni said.
Izard Kindall & Raabe represented Bishop-Bristol and the proposed class. MassMutual was represented by Sidley Austin LLP, Bulkley Richardson & Gelinas, and Shipman & Goodwin.
The case is Bishop-Bristol v. Mass. Mutual Life Ins. Co., D. Mass., No. 3:16-cv-30082-MGM, 2/5/19.