Compliance

Plan Providers Sued for “Unsuitable” Retirement Program

By Rebecca Moore editors@plansponsor.com | August 02, 2012
Page 1 of 2
View Full Article

August 2, 2012 (PLANSPONSOR.com) – Two small businesses and participants in their retirement plans are suing fiduciaries who gave them investment advice and administered the plans.

According to the complaint, defendant Fidelity Security Life Insurance Company (FSL) through its agents, defendants CJA Associates Inc. and Thomas Thorndike, used a pre-packaged program designed and administered by CJA and defendant First Actuarial Corporation (FAC) to induce the plaintiffs and other similarly situated businesses to establish employee benefit programs and invest plan trust assets in FSL annuities.    

Pre-packaged recommendations prepared by CJA and delivered by Thorndike promised the businesses that investing plan trust assets in these annuities would yield large tax breaks for them and secure large retirement benefits for plan participants.     

However, the complaint said, FSL, CJA and Thorndike knew or should have known that the investments they were recommending were wholly unsuitable because the cost far exceeded any potential benefits they conferred.  All three defendants knew that there were equally effective, less expensive options the businesses could have chosen and should have recommended.