Plan Providers Sued for “Unsuitable” Retirement Program

August 2, 2012 ( – 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.

FSL was paying commissions to agents up to 95% of the first year’s contributions followed by excessive percentages thereafter, and the plans’ claims for favorable tax treatment were dubious and would jeopardize the unusually large deductions CJA and Thorndike had touted to lure small businesses into the investment.    

Law firm Moukawhser & Walsh, LLC, which filed the suit, said the so-called Section 412 (e)(3) plans are under attack from the IRS as illegitimate attempts to avoid federal taxes.   

According to the complaint, the plans’ participants had little or no accrued benefits at various points because nearly all the plan assets were converted into commissions and fees, subjecting the plans to retroactive disqualification by the Internal Revenue Service (IRS).    

The lawsuit seeks to recover the plans’ losses, attorneys’ fees, costs and other equitable relief for fiduciary breaches under the Employee Retirement Income Security Act (ERISA).  

The complaint is at