A federal judge in Philadelphia has approved a $14 million settlement by New York Life Insurance Co. of claims by current and former employees that the company had violated pension law in the way it ran 4 retirement plans.
New York Life had settled the class action in October, subject to approval by Justice Bruce W. Kauffman of the U.S. District Court for Eastern Pennsylvania. Originally filed in 1999, the case was Mehling v. New York Life Insurance Co.
The employees claimed New York Life violated the Employee Retirement Income Security Act by investing their pension funds entirely in the company’s own mutual funds. Their attorneys had argued that plan trustees ignored the advice of a consultant who had advised them to move investments into a separately managed account, according to court documents.
Failing to follow that advice caused the plans to incur excessive fees and expenses, plaintiffs had argued.
The settlement funds, minus more than $4 million in attorney fees and costs, will be distributed to 35,000 current and former employees and agents who participated in the 401(k) plans from 1994 through 2005 and about 32,000 current or former employees or agents who were in the defined-benefit plans as of Dec. 31, 2005. Under the agreement, 70% of the funds will be allocated to the 401(k) plans and the remaining 30% to the pension plans.
New York Life also agreed to retain independent fiduciaries as consultants to its retirement plans through May 2010.
In approving the settlement, Judge Kaufman said he considered a number of factors, including the cost to the plaintiffs of carrying on the litigation.
The plaintiffs also risked failing to establish New York Life’s liability as the case advanced through the courts, Kaufman observed. He noted, for instance, that the pension plans were overfunded, a fact that might have undercut claims the plans had suffered losses.
As for the 401(k) plans, it was possible New York Life could show the use of mutual funds as an investment was “not so deficient as to preclude their use by a reasonable fiduciary,” he said.
In a statement, New York Life said the settlement affirmed its “commitment to its employees and agents through the company’s highly competitive benefit and pension plans.”
Terms of the settlement will be effective Apr. 5.