Tue, 04/27/2021
According to a status report filed in federal court in Massachusetts on April 21, 2021, John Hancock Life Insurance Co., has just settled a class action ERISA lawsuit alleging self-dealing and mismanagement of its employees’ 401(k) retirement plan. The lawsuit—originally filed by a single former participant in the retirement plan—alleged that John Hancock breached its fiduciary duty to the retirement plan members by using its 401k plan participants’ retirement savings to prop up its own investment funds, even if they were underperforming (or in some cases, failing entirely).
As alleged in the lawsuit, the John Hancock retirement plan—responsible for retirement totaling over a billion dollars—offered participants an array of investment products to select from: actively-managed funds, passive index funds, target date funds, target risk funds, and even a guaranteed interest account. But as of the end of 2014, the plan allowed its participants to investment only in investment products managed by or affiliated with John Hancock. According to the lawsuit, the plan’s overwhelming preference for John Hancock’s own investment products persisted even though many of the funds’ returns failed to meet their 1-year, 3-year, and 5-year benchmarks, were outperformed by competitors, and/or charged more expensive fees than their competitors. In fact, several of the store-brand investment products offered to John Hancock plan participants, the plaintiffs alleged, underperformed to such a degree that John Hancock closed the funds off from the broader marketplace. The lawsuit asserted that the self-interested decision to offer these underperforming and overpriced investment options to plan participants violated John Hancock’s duties of loyalty and prudence, in violation of ERISA.
Following the court’s denial of John Hancock’s motion to dismiss in July 2020, the parties attended mediation and successfully reached a settlement in principle, as reported to the Court on April 21, 2021. The Court has ordered the parties to submit a motion for preliminary approval of the settlement by June 1, 2021, so more details about the settlement will become public soon.
If you believe your retirement plan may be being mismanaged and would like to discuss how this case could relate to you, please contact us at info@mselaborlaw.com or 202-833-8855.
