New York Life Insurance Co. has settled a class-action lawsuit for $3 million with participants in two company 401(k) plans who alleged the plans offered a New York Life mutual fund pegged to the S&P 500 Stock index that was more expensive than similar index funds.
In Andrus et al. vs. New York Life Insurance Co. et al., the defendants “admit no wrongdoing or liability with respect to any of the allegations or claims in the complaint,” said the settlement document issued Feb. 14. The final settlement must be approved by a New York U.S. District Court, where the suit was filed in July 2016.
Plan participants said two New York Life 401(k) plans should have searched for S&P 500 index funds that were cheaper than New York Life's MainStay S&P 500 fund. “From 2010 to 2016, the plans' fiduciaries did not act in the best interests of the plans and their participants,” the lawsuit said.
The plans are the New York Life Agents Progress-Sharing Investment Plan and the New York Life Insurance Company Employee Progress-Sharing Investment Plan, with aggregate assets of $3.2 billion as of Dec. 31, 2015, according to the most recent Form 5500 filings.The document said the MainStay S&P 500 Index Fund carried a 35-basis-point fee compared to, for example, the Vanguard Institutional Index Fund Institutional Plus Shares, which has a 2-basis-point fee and tracks the S&P 500 index.
The plans retained the MainStay fund from 2010 until June 15, 2016 “when, in response to plaintiffs' investigation, it was announced that the plans would belatedly be switched“ to the Vanguard fund effective July 19, 2016, the lawsuit said. Participants filed suit on July 18.
The $3 million settlement covers payments to plaintiffs and legal costs, the settlement document said.
"While we believe we have acted in full compliance with the duties owed to our plan participants, we have decided that the best use of resources is to fund a settlement rather than litigation,” Kevin Maher, a New York Life spokesman, wrote in an email Friday. “The company's retirement plans continue to be a valued and important part of the high quality, comprehensive benefits package we provide to employees and agents."