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In a high-stakes retirement battle, the Liberty Mutual $13.4M 401(k) suit is poised to close with a multimillion-dollar payout and sweeping changes to how the insurance giant manages employee savings plans.

Under a proposed class settlement filed in Massachusetts federal court, Liberty Mutual Group Inc. has agreed to pay $13.4 million and overhaul aspects of its 401(k) oversight process. The deal aims to resolve allegations that excessive fees and lagging investment options steadily siphoned value from workers’ retirement accounts.

From Courtroom Clash to Settlement Table

The motion for preliminary approval was submitted Tuesday by a class of roughly 50,000 employee 401(k) participants. The lawsuit, brought under the Employee Retirement Income Security Act, names Liberty Mutual and its 401(k) plan administrative committee as defendants.

The case’s procedural path was anything but brief. Employees first filed suit in 2020. They survived a motion to dismiss in 2021. In 2023, they secured class certification, allowing them to represent plan participants and beneficiaries with assets dating back to April 2014.

Momentum shifted last June when U.S. District Judge Mark G. Mastroianni partially denied Liberty Mutual’s summary judgment bid on claims tied to allegedly underperforming investment options and excessive recordkeeping costs. That ruling set the stage for negotiations, culminating in a January agreement to settle the claims.

Cash Plus Structural Reforms

According to a memorandum supporting the motion, the $13.4 million settlement fund will cover class counsel’s fees and litigation expenses, with the remainder allocated to class members.

But the agreement goes beyond dollars.

Court filings reveal Liberty Mutual has agreed to implement non-monetary reforms designed to protect plan participants going forward. For three years, the company must instruct its plan recordkeeper in writing not to solicit employees for cross-selling proprietary financial products — including IRAs, managed accounts, investment products, and life or disability insurance.

In addition, the company’s retirement committee must initiate a request for proposal within 180 days of the settlement’s effective date for “investment and administrative consulting services unaffiliated with Liberty Mutual.” The RFP must identify at least three qualified candidates. The current consultant, Goldman Sachs Asset Management, may be considered among them.

The structural commitments, plaintiffs argue, are intended to reinforce fiduciary oversight and prevent conflicts of interest from creeping back into plan administration.

Counsel on Both Sides

Attorneys for the 401(k) participants include Jerome J. Schlichter, Joel D. Rohlf, Troy A. Doles, Kurt C. Struckhoff, Nathan D. Stump and Ruben R. Chapa of Schlichter Bogard LLC, along with Robert T. Naumes and Christopher Naumes of Naumes Law Group.

Liberty Mutual is represented by James R. Carroll, Michael S. Hines, Mary E. Grinman, Nicole Pacheco and Nicholle P. Knapp of Skadden Arps Slate Meagher & Flom LLP.

Representatives for both sides did not immediately respond to requests for comment regarding the proposed resolution.

If approved, the settlement will mark the end of a five-year legal fight that put the spotlight on fiduciary responsibility and the fine print of retirement investing — where even small fees, compounded over time, can echo like thunder in a worker’s nest egg.