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MassMutual Stable Value Crediting Rates Case

A participant in the Arthur J. Gallagher & Company 401(k) Plan has filed suit against MassMutual Life Insurance Company, alleging that, in violation of ERISA, MassMutual reaps tens of millions of dollars annually in undisclosed compensation from the Arthur J. Gallagher & Company 401(k) Plan and other similarly situated 401(a) and 403(b) plans that offer MassMutual stable value accounts (SVAs). MassMutual markets many SVAs to retirement plans, which also incorporate MassMutual’s own issued group annuity contracts, and these contracts periodically credit income to the plans and plan participants. Rates vary within each crediting period, with MassMutual setting the crediting rate for all money added to the SVAs during each period. The lawsuit claims that MassMutual sets this rate below its internal rate of return (IRR) on the invested capital it holds in the SVAs, creating a large profit, and that MassMutual does not disclose the difference between the IRR and the crediting rate to plan sponsors or participants.; February 11, 2016.