Ala. Attorney General Takes Over 457 Plan Fee
Probe
September 2, 2009 (PLANSPONSOR.com) - Alabama
Attorney General Troy King has taken over a probe into at
least $10 million in fees paid by to the Alabama State
Employees Association from the 457 Plan accounts of current
and retired state workers.
Forbes reported that King has already asked Alabama
Securities Commission (ASC) Executive Director Joe Borg to
delay any further work on the commission's ongoing
investigation of Nationwide's involvement with the state's
457 program, but Borg then opted to pull the ASC out of the
picture in favor of King's broader investigative
authority.
Forbes said Borg's agency had worked out a tentative
deal calling for Nationwide and the
Alabama State Employees Association to pay
just over $6 million into the 457 accounts of the 21,000
participants using the Nationwide-administered plan.
King told Forbes the matter needed to be
reviewed under more than securities law including tax and
insurance mandates, and that he wanted to bump up the
settlement amount.
According to an ASC report of its probe
into the
"endorsement fee"payments by Nationwide to theAlabama State Employees Association (ASEA), which
oversees the $382-million retirement savings
program, and Public Employees Benefits Corporation
(PEBCO), it's for-profit subsidiary,the "endorsement fee" began in 2001 and was funded by
Nationwide, reducing the amount of interest it paid on the
fixed option of the plan by 20 basis points. The 2001
contract was for three years and would increase the fee
paid to ASEA to $1.05 million in 2002, and $1.1 million in
2003.
"Although the current plan is better for the state
employees than the previous plan, the involvement of the
ASEA has cost approximately $10 million since 2000 from
participant's retirement accounts," the ASC report
declared. "The funds paid to ASEA/PEBCO do not appear to
be justified, and are in fact mostly profits to the
association. It is also certain that it is not disclosed
to state employees who participate in the plan that funds
they believe are going into a retirement account are
being used to subsidize the ASEA."