The price of New York Life’s 401(k) lawsuit: $19M

investmentnews.com:

New York Life has agreed to pay $19 million to end a lawsuit over the company’s use of its own investment products in its 401(k) plans.

The agreement, submitted Monday in U.S. District Court in the Southern District of New York, will bring to a close a three-year old case that accused the insurance company of breaching its fiduciary duty to its employees.

The monetary amount is far from the biggest in the young history of 401(k) litigation, but it’s much more than a slap on the wrist. About two-thirds of the $19 million, or $12.7 million, will likely go to an estimated 40,000 individuals who are or were participants in the insurer’s $4.1 billion retirement plan for employees or $930 million plan for agents, according to court records and data from the Department of Labor. Lawyers representing plaintiffs and the class will ask the court for as much as a third of the total settlement, or $6.3 million.

The settlement follows other developments in lawsuits against financial services companies over the use of in-house products in their retirement plans. Earlier this month, a US appeals court upheld summary judgment in favor of Goldman Sachs in a 2019 case over that company’s inclusion of Goldman Sachs Asset Management funds within its 401(k).

The Employee Retirement Income Security Act doesn’t forbid financial services companies from including their own products in their retirement plans. After all, doing so is one way that investment providers arguably could show that they believe in the quality of their products.

But, as with any other fiduciaries, having a documented, prudent process showing how and why they selected the investments they did is considered a strong defense against ERISA lawsuits.

“The lesson of the Goldman