The Associated Press reports that the settlement will cover civil suits filed over fees that were paid to a lobbying group for state workers. Last year, the Alabama Securities Commission reported that its probe into “endorsement fee” payments by Nationwide to the Alabama State Employees Association (ASEA) and Public Employees Benefits Corporation (PEBCO), the union’s for-profit subsidiary, found the payments began in 2001 and reduced the amount of interest paid on the fixed option of the plan by 20 basis points.
“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,” the report said. The fees totaled more than $11 million.
The controversy led Alabama to move the plan to Great-West Retirement Services (see Fee Probe Leads Alabama to Change 457 Providers). Nationwide had been the provider for the $360-million plan for 30 years.
The 20-page agreement, obtained by The Associated Press through an open records request, provides for Nationwide to pay $15.5 million and Aon, a consulting firm that advised the employees’ association, to pay $500,000.
In a statement, Nationwide responded: “Nationwide is pleased to have reached a resolution with the state of Alabama, the attorney general and other parties. If approved by the Courts, the Plan and its participants will benefit from this settlement, and all sides will avoid the cost and distraction of prolonged litigation. Nationwide is fully committed to cooperating with all parties to finalize the agreement and remains committed to upholding the highest ethical standards and business practices as a leading provider of retirement plans to the companies and communities we serve.”