Madison-based NeuGen sues over retirement losses

A Wisconsin company is suing over millions of dollars in retirement losses, after hundreds of its employees were “abruptly” dropped from participating in a retirement fund.

The lawsuit filed by Madison-based NeuGen on Wednesday accuses MassMutual, a Massachusetts-based financial services provider, of breach of contract and violating the Massachusetts Consumer Protection Act.

The suit says nearly 300 current and former NeuGen employees lost a collective $3 million from their  401(k) retirement savings when MassMutual kicked NeuGen out of a Stable Value Core investment fund.

MassMutual ended agreement to manage retirement plan after mass layoffs at NeuGen

The decision from MassMutual came after NeuGen announced in 2022 that it planned to lay off more than 100 employees.

MassMutual responded by ending its agreement to manage and invest retirement funds on behalf of NeuGen. It liquidated those funds and offered NeuGen a lump sum payment at a “depressed” market value, according to the lawsuit.

“Because of the unique factors in the market at the time, including rising interest rates, MassMutual knew that the Market Value of the Fund was lower” than a more stable measure known as book value, the lawsuit says. “MassMutual dumped its market losses onto Plan participants, thus benefitting from this distribution at Market Value at the expense of the Plan participants.”

NeuGen provides medical management and administrative services to insurance and other health care companies. It was founded in 2018 as a spin-off of WEA Trust, a nonprofit created to provide insurance and retirement benefits to Wisconsin public employees.

Participants saw their investments in the MassMutual fund drop by 18 percent when the agreement ended, according to NeuGen. “Several” participants selected that Stable Value Core investment fund as their sole 401(k) investment option, according to the lawsuit.

NeuGen President and CEO Vaughn Vance says MassMutual’s decision came as an unpleasant surprise to plan participants, many of whom chose the since-terminated plan because it had been marketed as a more stable option that would be less vulnerable to market fluctuations.

“It had significant practical impact on employees and retirees, some of whom had no idea until they got their statements that they were going to be affected in that way,” Vance said. “And so decisions about retirement, kids’ school, all of those things come into play.”

The goal of the suit, Vance said, is to recoup those losses for plan participants. The complaint filed in Massachusetts asks for damages in an amount to be determined by the court.

Vance said he was taken aback by MassMutual’s response after NeuGen notified the firm about its upcoming layoffs because of contract requirements.

“It would have been nice to have had a conversation with them to discuss the options before they summarily kicked us out,” he said. “We didn’t expect that their their action would be an immediate termination and payout at a low dollar figure.”

MassMutual says it tried working with Neugen, denies wrongdoing

But, in a statement, a MassMutual spokesperson disputed NeuGen’s characterization.

“We have tried to work with NeuGen after their investment agreement terminated due to significant NeuGen layoffs, and while we empathize with plan participants who were impacted by unfavorable market conditions at the time of their layoffs, we did nothing wrong and we will defend ourselves against any claims suggesting otherwise,” a spokesperson said.

In all, current and former NeuGen employees and their families had $21.5 million invested in MassMutual’s Stable Value Core investment plan. Current employees held an average account balance of $57,000, while retirees
had an average of $117,000, according to NeuGen.

“Dozens of participants saw tens of thousands of their retirement savings evaporate overnight — many of whom were also losing their long-held positions at NeuGen,” the lawsuit said.

One retiree says she lost $130K overnight

Cindy Griffiths retired in 2019 after nearly two decades working for WEA Trust. She says she lost roughly $130,000 “overnight” when MassMutual cut off its agreement with NeuGen.

Griffiths, a former manager for WEA’s life, disability and long-term care department, says she looked forward to traveling more during her retirement and to remodeling her home.

She had hoped to help her daughter pay for graduate school and to help her mom pay for assisted living.

But, Griffiths said, the abrupt hit to her retirement savings has forced her to reevaluate.

“It was kind of devastating,” she said. “That was a plan that was supposed to be a conservative place to put my money. I’m 68 years old, and I don’t have a high-risk tolerance, and my husband and I decided that that was the safest, best place to put it.”