A proposed class action lawsuit alleges the John Hancock Life Insurance Company (U.S.A.) has imprudently and inappropriately pushed its own life insurance products in an employee incentive-investment retirement plan despite the offerings’ “poor performance, high costs” and disfavor among fiduciaries of similarly sized plans. The 28-page complaint alleges that John Hancock’s self-dealing, coupled with an overall failure to monitor the plan’s administrative expenses, has cost proposed class members millions in excessive fees.
Citing the Employee Retirement Income Security Act of 1974 (ERISA), the lawsuit kicks off by stating that the “potential for disloyalty and imprudence is much greater” in defined contribution retirement plans, such as that offered by John Hancock, than in defined benefit plans. According to the case, when plan participants’ benefits are limited to the value of their investment accounts, which are at the mercy of market performance and employer contributions, employers have “no incentive to keep costs low or to closely monitor the plan” to ensure prudence because employees essentially shoulder fee- and performance-related risks.
The complaint relays that for financial service providers like John Hancock, “the potential for imprudent and disloyal conduct is especially high” given the plan’s fiduciaries “are in a position to benefit” the provider itself through the employee retirement plan. One means of benefiting, the case claims, is by utilizing proprietary investment products that “a non-conflicted and objective fiduciary would not choose.”
John Hancock, one of the nation’s largest 401(k) providers, has failed to act in the best interest of plan participants in that it’s offered “only John Hancock investment products” within the 401(k), the complaint alleges. Further, John Hancock has fallen short in objectively evaluating the plaintiff’s options in an unbiased manner, the case claims, as well as consider whether non-company investment options would prove to be better investment alternatives.
Adding to these allegations, the lawsuit further claims John Hancock has not “prudently and loyally” kept an eye on the 401(k) plan’s administrative expenses, which the plaintiff says have caused participants to pay “over three times what a prudent and loyal fiduciary would have paid for such services.” These fees, the case alleges, are paid through revenue sharing payments derived directly from the investment fees charged to proposed class members.
Filed in Massachusetts, the case looks to cover all participants and beneficiaries of the incentive-investment plan for John Hancock employees at any time on or after February 27, 2014.