Some employees in Washington, D.C. may have had the experience of having their retirement funds mismanaged by the investment manager in charge of them. The company Massachusetts Financial Services Co. agreed to a settlement of $6.875 million after a lawsuit was filed in July 2017 by employees who alleged that the company violated the Employee Retirement Income Security Act of 1974. The settlement document was filed on June 14.
Employees said the company had used in-house funds that were expensive and underperforming for their 401(k)s so that the company could make a profit. As part of the settlement agreement, MFS denied wrongdoing, fault, liability or damages. A spokesman said the company agreed to settle the case to avoid further litigation. A court must approve the settlement amount. The company must also change its retirement plans in several ways. It must stop using an in-house option as the default fund. It also has to hire a third party who will evaluate the plans annually.
The settlement is neither the highest nor the lowest paid in similar lawsuits. For example, Branch Banking & Trust Co. paid $24 million while Deutsche Bank paid $21.9 million. Allianz and Citigroup are some of the other companies that have faced similar lawsuits. A lawsuit filed against American Century Investments and a few others have been dismissed.
ERISA benefits employees by protecting their pension, health and other benefit plans and sets certain standards for those plans. Employees who feel that the company that handles their benefits might be violating their fiduciary duty may want to consult an attorney to find out their rights and pursue legal action. Employees might want to consider what kind of settlement might be acceptable to them. For example, in this case, although the company did not admit wrongdoing, it changed its practices.