A district court in Connecticut ruled ING Life Ins. and Annuity Co. (“ILIAC”) a fiduciary related to its revenue sharing practices and scheduled a four week trial to begin anytime after September 3.
The lawsuit, Healthcare Strategies v. ING Life Insurance and Annuity Co., could have huge ramifications. This class action suit covers all ING plans where they have maintained a contractual relationship based on a group annuity contract or group funding agreement and for which, since February 23, 2005.
Here are the allegations:
(1) ILIAC has included certain mutual funds as investment options based on the funds’ revenue sharing payments to ILIAC rather than the funds’ potential to benefit the plans,
(2) ILIAC’s receipt of revenue sharing payments constitute prohibited transactions under ERISA 406(b)(1) & (3),
(3) The fees charged by ILIAC to the plans do not bear a meaningful relationship to the cost of the services provided, and they thus constitute excessive compensation to ILIAC, and
(4) By taking as its compensation the spread between the guaranteed payment and the investment performance of assets in fixed accounts and guaranteed accumulation accounts, ILIAC has retained excessive compensation and engaged in self-dealing.
Insurance companies hoping that the door was closed on the industry standard of revenue sharing and claiming no fiduciary responsibility are probably more than a little nervouse. Especially after a recent settlement where the advisor failed to disclose $500,000 worth of revenue sharing: http://www.dol.gov/ebsa/newsroom/2013/13-1530-PHI.html
Hello Mr. Employer! Does your plan engage in revenue sharing? You had better know because it puts you at risk too, aside from steadily bleeding your plan.
Thank you Thomas E. Clark, Jr for your heads up blog post over at http://blog.fraplantools.com/the-roller-coaster-continues-court-finds-ing-a-fiduciary-over-revenue-sharing-practices-schedules-trial-for-september/