In the lawsuit, filed in the U.S. District Court for the Southern District of New York, Skin Pathology Associates contends Morgan Stanley and Company, Inc., which sought out an investment and recordkeeping platform for the plaintiff’s 401(k) profit-sharing retirement plan, engaged in “prohibited transactions under ERISA [the Employee Retirement Income Security Act of 1974].” It also alleges ING Life Insurance and Annuity Company benefited from such transactions.
The lawsuit says Morgan Stanley’s “Alliance Partners” program required retirement plans to pay additional compensation, but Morgan Stanley did no additional work for this compensation. According to the complaint, “The Additional Compensation is purely a ‘pay-to-play’ fee.”
The lawsuit also says Morgan Stanley is acting under a conflict-of-interest because its economic incentive is to direct retirement plan clients to purchase investment/recordkeeping platform services from the Alliance Partners which pay it additional compensation rather than from platform providers that do not. Skin Pathology Associates contends ING participates in and takes advantage of this conflict-of-interest by paying additional compensation in exchange for being listed as one of Morgan Stanley’s Alliance Partners.
In an e-mailed statement to PLANSPONSOR, ING said, “The case was filed yesterday and we have not yet been served. We deny all allegations of any wrongdoing. Beyond that, our policy is not to comment on pending litigation.”
An effort to obtain a comment from Morgan Stanley was unanswered.
A copy of the complaint is here.
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