Massachusetts Mutual Life Insurance Company will pay $1.625 million to settle charges that it failed to sufficiently disclose the potential negative impact of a “cap” it placed on a complex investment product that investors were planning to use for retirement.

MassMutual was represented by Colleen Mahoney and Louis Greenstein of Skadden Arps in Washington, D.C.

The Securities and Exchange Commission (SEC) investigation found that MassMutual included a cap feature in certain optional riders offered to investors, and the cap potentially affected $2.5 billion worth of MassMutual variable annuities.

Neither the prospectuses nor the sales literature sufficiently explained that if the cap was reached, the guaranteed minimum income benefit (GMIB) value would no longer earn interest.

MassMutual’s disclosures instead implied that interest would continue to accrue after the GMIB value reached the cap, and dollar-for-dollar withdrawals would remain available to investors.

A number of MassMutual’s own sales agents were confused by the language in the disclosures, and investors were not sufficiently informed of the potential negative effect of taking withdrawals if they reached the cap approximately a decade from now.

MassMutual removed the cap after the SEC’s investigation to ensure that no investors will be harmed.

“Investors shouldn’t have their retirement nest eggs at risk because of undisclosed investment complexities,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “Through our proactive investigative efforts, we exposed a problem with a complex variable annuity investment at least a decade before it could have harmed investors.”