The investigation into whether insurance companies paid pension plan managers to choose the investment options they offer their participants — such as mutual funds and annuities — is expected to lead to lawsuits and settlements within the next few months, a source told Reuters.
The source, which Reuters chose not to name, said one reason consumers are having to pay high fees for certain investments is because the funds are paying money to be on the menu. However, New York Attorney General Eliot Spitzer’s office would not comment to Reuters on the source’s allegation, only saying the investigations were making progress.
Spitzer’s investigation of the insurance industry came to light in May when Hartford Financial Services Group Inc. and ING Group said they were the targets of lawsuits brought by the New York Attorney General.
The investigation into such practices has already resulted in a $20 million settlement in May by The Hartford Financial Services Group, admitting it made improper payments to insurance brokers so they would recommend its annuities to pension plans. The charges against the Connecticut-based company held that the group was able to sell more than $800 million worth of annuity pension plans from 1998 to 2004 Hartford Agrees to $20M Annuity Sales Scandal Settlement .
According to Spitzer, the allegations concerned fake “expense reimbursement agreements” (ERAs) from The Hartford to four brokers who held themselves out as trusted advisors to retirement plans: Dietrich & Associates, Brentwood Asset Advisors, BCG Terminal Funding, and USI Consulting Group.
Dutch investment bank ING has also been under fire for such practices, with the Foundation for Education Reform and Accountability (FERA) asking Spitzer’s office to investigate deals between the New York State United Teachers union and ING. FERA said the teachers union received $3 million a year from ING for recommending members enroll in an annuity with high fees that lower overall returns NY Retirement Fund in Payment Arrangement with Investment Company .
« NH Law Extends Medical Coverage for Ill College Students