"It's a relic to put $500 million in a general account," said Thomas Clark, director of fiduciary oversight for Fiduciary Risk Assessment and FRA PlanTools based in Charlotte, N.C. "What's interesting here is if the allegations are true that such a large plan is continuing to use a general account" for its fixed income fund.

Most plans, he said, use synthetic products that spread the risk while guaranteeing a rate of return, adding that, as far he knew, only large insurance companies offering 401(k)s to their own employees still used the investment product.

Still, he said, using a general account was not illegal per se and that the details of the case would determine if MassMutual was in the wrong.

The CEO, the court suit said, was among other company executives named as plan fiduciaries, a role in which they were bound to make decisions in the "best of interests of the plan, not themselves or MassMutual." Instead, the suit claimed decisions were made in the best interests of the defendants.

The lawsuit alleged that excessive fees were "larded" in the plan. The plan, which has 14,000 participants and over $1 billion in assets, was charged $5 million in fees in 2010. The employees claim they were charged higher fees than those outside the company for similar services.

As evidence that the company was engaged in self dealing, the lawsuit quoted plan documents: "It will be a breach of this agreement for the plan sponsor to adopt any change or amendment that would have an adverse effect on MassMutual's administrative procedures or the financial experience of MassMutual."

MassMutual vowed to fight the lawsuit.

"We believe the comprehensive retirement benefits we offer our participants help them save toward a secure financial future, and we will defend vigorously against these baseless allegations," the insurer said in a statement.