This class action lawsuit alleges that Metropolitan Life Insurance Company ("MetLife") breached its fiduciary duties to ERISA-covered retirement plan clients by failing to disclose key information including the manner in which it sets the internal "crediting rate" used to distribute capital investment income to their accounts.
The plaintiff is bringing suit on behalf of Jupiter Center Retirement Plan and all other similarly situated ERISA-covered employee pension benefit plans whose assets were invested in MetLife Group Annuity Contract Stable Value Funds within the six years prior to the filing of the complaint. Defendant MetLife sells group annuity contracts ("GACs") to retirement plans that include so-called Stable Value Funds ("SVAs"). These contracts serve to periodically credit a certain amount of income to retirement plans and the participants in such plans who invest their retirement plan accounts in SVAs. This income, typically expressed as a percentage of the invested capital, is determined pursuant to the "Crediting Rate". This rate varies, as it is set and reset by MetLife for all money added to its SVAs during the given period.
MetLife retains sole and exclusive discretion to determine the Crediting Rate used in each relevant period and sets it well below its internal rate of return on invested capital. This ensures that the company receives significant profits for its own benefit. MetLife does not disclose to its retirement plan clients and their participants the difference between its rate of return and the Crediting Rate used, thus collecting millions of dollars in undisclosed compensation from the plans and participants to whom the company owes fiduciary duties, according to the complaint.
It is asserted that MetLife's invested assets in its general account which are used in the calculation of the applicable Crediting Rate and income to the GACs are rightly defined as plan assets under the federal Employee Retirement Income Security Act (ERISA) and that the company is thus a fiduciary to the plans in its discretionary handling and management of plan assets. The plaintiff argues that in exercising unfettered authority to set its own compensation via resetting of the Crediting Rate, the imposition of "expense" charges and its practice of taking a "pricing spread", MetLife earns direct and indirect compensation without disclosing the details of it to plan participants. Under ERISA, compensation related to covered plans is not deemed reasonable unless it is fully disclosed prior to commencement of the contract for services, something which was not the case with the plans in question.
Alleging violations of numerous sections of ERISA concerning breach of fiduciary duties and prohibited self-dealing, the plaintiff is now seeking certification of this lawsuit as a class action, an order enjoining MetLife from further violating the duties imposed by ERISA with respect to the plans, damages, an accounting, disgorgement of profits, equitable lien, constructive trust or any other remedy the court deems appropriate. Interest, attorneys' fees and the associated costs of bringing suit are also included in the plaintiff's request for relief.
Enacted in 1974, the Employee Retirement Income Security Act sets minimum standards for voluntary pension plans with the goal of safeguarding the interests of plan participants and beneficiaries. The legislation put into effect minimum standards of management and conduct for fiduciaries of such plans, outlined key disclosure requirements and provided essential remedies for breaches thereof.
This class action lawsuit was filed on December 3, 2015. We will continue to review the docket in 2016 and provide updates as necessary.