New York Life Sued In First-Ever 'Index-Fund-Only' Fiduciary Breach


New York Life Insurance Company can now add itself to the list of companies sued by its employees for breach of fiduciary responsibility— but this case is a little different, and the first of its kind. Although suits of these kind typically involve allegations made against multiple types of investments, this case is the first to include allegations exclusively against an index fund.

The insurance company sponsors two employee 401(k) plans—one with $600 million in assets and one with $2.5 billion. Of all the investments between those two accounts, one index fund (based on the S&P 500) appeared a greater moneymaker for the investment company than the plan participants: the MainStay S&P 500 index fund. This investment charged far higher fees than other investment options, allege the plaintiffs in the class-action suit formally called the suit expects a class of 25,000 New York Life 401(k) plan participants.

New York Life and its subsidiaries own and operate the MainStay index fund. According to the formal complaint filed in the U.S. District Court for the Southern District of New York contends, “the Plans’ fiduciaries took advantage of the opportunity to promote New York Life’s financial interests by using the Plans to promote MainStay mutual funds.”



The index fund in question required maintenance fees that were 17 times more-costly than comparable funds. The formal complaint also mentions the MainStay index fund cost 35 basis points, whereas similar investments cost considerably less; Vanguard Group offers a fund at two basis points and State Street Global Advisors at four basis points. The employees contend New York Life could have saved plan participants $3 million over the course of five years had the plan sponsor invested with Vanguard.

According to ERISA (Employee Retirement Income Security Act of 1974), employers must ensure that “fees paid to service providers and other expenses of the plan are reasonable in light of the level and quality of services provided.” Sponsoring investments with excessive feesviolates this federal regulation, and the plaintiffs argue the plan sponsors “improperly and unjustly benefited from the excessive fees and expenses.”

Nichols Kaster, a law firm specializing in employee protection law, filed the class action suit on behalf of two New York Life employees. This year the firm filed several suits alleging other employers also breached their fiduciary responsibility as New York Life did. The other suits include litigation between the following companies and their employees:

  • Putnam Investments LLC

  • Deutsche Bank

  • American Airlines Inc.

  • M&T Bank Corp.

  • American Century Services LLC

Although the “index-fund-only” angle of this lawsuit makes it unique, cases like this one appear far too often in US pension news. Over the past few years, the fate of US 401(k)’s hung in the balance after the surfacing of multiple court cases similar to this one and the resulting call for industry reform from the federal government.

In a sea of fiduciary lawsuits, one case had a particular impact on the 401(k) landscape: Tibble vs. Edison. The Supreme Court granted this case certiorari in October of 2014, making it the first suit of its kind to reach the highest court.





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