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Proprietary Fund Suit Settles for Cash and Change(s)

Practice Management

Terms of a proprietary fund suit settlement with Mutual of America have been revealed.

The plaintiffs had claimed the plan fiduciaries had “an imprudent and disloyal preference for its own proprietary funds.” Represented in the action by Nichols Kaster PLLP, the participant/plaintiffs had claimed that the 2,000 participant, $436 million plan paid annual administrative fees “roughly ten times higher than what participants would have paid for administrative services had Mutual of America diligently investigated the marketplace and hired a third-party recordkeeper to provide either the same set of services or services of superior quality.”

Indeed, and while it cites only “plaintiffs’ investigation” as a reference point, the suit claims that “…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.” 

Quick ‘Draw’


The settlement comes in a notably short period of time (the suit was first filed in September 2022), but the settlement notes that, despite that, the following actions had already occurred: (1) Class Counsel undertook an extensive investigation of the factual and legal bases for Plaintiffs’ claims prior to commencing the action; (2) the parties’ factual and legal contentions were staked out in connection with the original motion to dismiss, the Amended Complaint, and the renewed motion to dismiss; (3) Defendants produced several categories of important Plan documents prior to settlement negotiations; and (4) Class Counsel had the necessary experience and qualifications to evaluate the Parties’ legal positions and the early discovery that was produced.

The Settlement


Under the proposed Settlement’s terms (Goldstein et al. v. Mutual of America Life Insurance Company, case number 1:22-cv-07862, in the U.S. District Court for the Southern District of New York), and in language more transparent about the underlying source of funds than most contain, “Mutual of America will cause its insurers to pay a Gross Settlement Amount of $2,750,000 into a common fund for the Settlement Class’s benefit.” The parties state, as the parties in such actions always do, that this is a “significant recovery for the Settlement Class compared to the claims that were alleged, and it falls well within the range of negotiated settlements in similar ERISA cases.” 

As for the sufficiency of that amount, the settlement comments that “at the time of the settlement, Plaintiffs’ damages models estimated that the total losses were approximately $10.3 million,” and that based on that the $2.75 million recovery represents approximately 26% of the total estimated losses — “on par with numerous other ERISA class action settlements that have been approved across the country.”

Other Terms


In addition to the cash terms, the Mutual of America defendants “will ensure that at least half of the Plan’s investments are unaffiliated with Defendants (i.e., investments not managed by Mutual of America or any of its affiliates or subsidiaries) for the next three years.” Moreover, the settlement says that the “defendants have also agreed to retain the Plan’s current net asset value (NAV) investment platform for the next three years provided, however, that Defendants will not be bound by this if they determine that using the NAV platform is no longer consistent with ERISA.” Terms that “addresses the core issue that Plaintiffs raised in the lawsuit and is designed to ensure that the Plan’s expenses are reasonable going forward.”

Now, in addition to the fees and reimbursements for attorneys’ costs (those to be submitted for consideration at least 14 days before the deadline for objections to the proposed Settlement), the agreement also calls for “service awards” up to $5,000 per each of the named plaintiffs in the case.

And now, we wait to see if the court approves.