ING to Compensate Upstate Teachers After Probe Reveals Hidden Influence
over Union
LAWFUEL – Law News, Law Jobs – Attorney General Eliot Spitzer today announced a landmark agreement that will set new national standards for transparency in the marketing of retirement products and provide compensation to
each of more than 50,000 teachers in upstate New York.
The settlement with Dutch insurance giant ING resolves a year-long investigation of the company’s relationship with New York’s largest teachers’ union. The settlement was reached in conjunction with New Hampshire authorities.
“This agreement raises the bar for the entire retirement products industry,” Spitzer said. “It will help ensure that workers receive accurate and complete information needed to make good investment decisions. In addition, the agreement provides significant compensation to teachers who received biased investment advice as part of an undisclosed arrangement between ING and
their union.”
Spitzer’s office began an investigation last year after reading press reports about an arrangement
between ING and the New York United Teachers (NYSUT). The Attorney General’s office determined that ING had made payments of as much as $3 million per year to NYSUT as inducement for the union to endorse and promote ING group annuity plans. The full extent of these payments was not disclosed to members, nor were members aware that the union was steering them into the ING plan with biased investment advice.
NYSUT settled with the Attorney General’s office in June, agreeing to a series of reforms and payment of $100,000 in costs.
Under today’s settlement, ING has agreed to set a new industry standard for retirement product disclosure by providing a simple cover-page summary of all the costs of each plan it offers. This disclosure will include a chart demonstrating the impact that these costs have on long-term investments. On this disclosure page, ING will also explain that mutual fund managers often pay ING to have their funds appear on the menu of options offered to investors.
As part of the settlement, ING will also pay $30 million as restitution directly to NYSUT members who participated in the ING plan, a so-called 403(b) plan. Each participant will receive a portion of this fund calculated on the basis of that participant’s investment history. The average
payment will be approximately $450, but every teacher will receive at least $100. The agreement
does not cover New York City teachers, who are represented by a different union.
The agreement was hailed by investor advocates:
John Bogle, founder of the Vanguard Group, said: “For too long, workers approaching retirement – – for whom investment decisions are absolutely crucial – – have been denied clear information that would allow them to make informed decisions. This agreement begins the process of bringing much needed sunlight to the world of retirement products.”
The Attorney General thanked New Hampshire Secretary of State William Gardiner’s Bureau of Securities Regulation, led by Director Mark Connolly, for its cooperation in the investigation and settlement discussions. The agreement provides another $3 million in restitution to New Hampshire.
This investigation and settlement were undertaken by Assistant Attorneys General Harriet Rosen, Peter Dean, and Patrick Findlay, under the direction of David Brown IV, Chief of the Attorney General’s Investment Protection Bureau, with assistance provided by Economist Hampton Finer of the Attorney General’s Public Advocacy Division.
