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September 22, 2020 03:19 PM

Mutual of Omaha to settle ERISA case for $6.7 million

Robert Steyer
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    Mutual of Omaha Insurance Co. has agreed to pay $6.7 million to settle ERISA complaints by participants in two company 401(k) plans that fiduciaries favored some proprietary products over other investment options and charged extra fees for non-proprietary funds in the investment lineups.

    "The parties want to compromise and settle all issues and claims relating to the allegations made in this action on behalf of all members of the proposed class," said a notice filed Sept. 18 by plaintiffs' attorneys in support of the preliminary settlement.

    "The benefit of the proposed settlement must be considered in the context of the risk that further protracted litigation might lead to no recovery, or to a much smaller recovery for plaintiffs and proposed class members," said the document filed in a U.S. District Court in Omaha, Neb., in the case of Lechner et al. vs. Mutual of Omaha Insurance Co. et al.

    "Defendants mounted a vigorous defense at all stages of the litigation, and plaintiffs expect that defendants would have continued to do so during protracted discovery and trial and potentially through appeal," the document said.

    The settlement in the class-action lawsuit, initially filed in January 2018 and later amended, requires approval by a federal District Court judge. The preliminary settlement agreement said more than 7,000 participants had account balances at the end of 2018.

    The participants had accused the company, plan fiduciaries and an affiliate, United of Omaha Life Insurance Co., of "self-dealing" by offering certain proprietary products. United of Omaha, also a defendant, provided administrative and investment services for the plans.

    The defendants sought to have the case dismissed, but Senior U.S. District Judge Joseph F. Bataillon rejected the request in December 2018. Both parties began discovery in preparation for a trial. They subsequently agreed to mediation, which eventually led to the proposed settlement. An independent fiduciary will review the terms.

    The Mutual of Omaha 401(k) Long-Term Savings Plan had $844 million in assets as of Dec. 31, 2018, according to the latest Form 5500.

    When the lawsuit was initially filed, the Mutual of Omaha 401(k) Long-Term Savings Plan was the only DC plan.

    On Jan. 1, 2019, this plan was split into two plans "with the split determined on whether participants were active participants in or excluded" from the company's defined benefit plan, the settlement document said.

    DB participants remained in the Long-Term Savings Plan while other participants were transferred to the Mutual of Omaha 401(k) Retirement Savings Plan. Both DC plans are affected by the proposed settlement.

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    Mutual of Omaha 401(k) fiduciary breach case to get hearing
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