New York ERISA Suit Ends in Settlement

New York, NYEight years of litigation has passed and a settlement has finally been approved. A judge in federal court granted a settlement of $14 million in a class action lawsuit against New York Life Insurance Co. (NYL) that violated the Employee Retirement Income Security Act of 1974. The lawsuit was filed by employees who alleged the company mismanaged pension funds by investing in its own mutual funds to make them look more profitable.

U.S. District Judge Bruce W. Kauffman, is the judge that awarded the settlement. He affirmed the settlement in Mehling et al. vs. New York Life Insurance Co. in U.S. District Court for the Eastern District of Pennsylvania. Of the money that was awarded, $4.2 million was designated to cover administrative costs and attorney fees for the plaintiffs. The remaining amount of the settlement will be deposited in NYL retirement plans based in New York that will benefit the participants involved in the settlement class. In addition to the money from the settlement, NYL made an agreement to receive advice from outside advisors regarding their investments until May 31, 2010.

The suit is a result of allegations regarding the improper investment of billions of dollars in assets belonging to a number of employee benefit plans sponsored by NYL being invested into NYL mutual funds to boost profits. This also makes funds appear more attractive to those who invest in them.

November 1999 was when the original complaint was filed, and alleges that millions of dollars were drained as a result of their actions. Options with better performance were available for investors to invest in, but the appearance that these mutual funds were performing better than they were provoked investors to continue investing in these funds.

NYL has denied the allegations and has stated that the menu of investment options that are named in the case have all been prudently selected at all times. They have further stated that ERISA does not prohibit them from investing a retirement plan's assets into a proprietary mutual fund offered by the sponsor of the plan, granted that the fees and the investments are appropriate.

NYL has further stated that the company has been receptive to the settlement for the fact that the majority of the settlement money goes toward the affected employees and will work for them in their new plans. NYL wants it known that the result of the settlement is a reaffirmation of their commitment to their agents and employees through the company's competitive pension plans and benefits.

By Ginger Gillenwater