There may be less than a month remaining before New York state's gubernatorial election, but Eliot Spitzer is still finding time to craft settlements with retirement plan providers. Tuesday, the New York Attorney General announced a deal with ING that he values at $33 million. At issue was ING's non-disclosed practice of paying state teacher unions in New Hampshire and New York to steer their members to ING products offered through the two states' 403(b) defined contribution plans.
As part of the settlement, ING also agreed to create a one-page fee disclosure sheet that will be distributed to plan participants. That disclosure sheet could have a bigger impact on the industry than the settlement payment and has the potential to become a de facto
standard for providers in the teacher's market. That disclosure could also raise the bar for similar disclosures in the private sector retirement plan market.
The payout includes $30 million to New York teachers and another $3 million to those in New Hampshire. That part of the settlement was negotiated with New Hampshire Secretary of State William Gardiner and the Bureau of Securities Regulation. The union officials did not personally benefit from the arrangements, so they were not a part of the settlement, according to the NYAG's office.
According to Spitzer's staff, each of the teachers covered by the settlement will receive at least $100, though the form of that payment has yet to be determined. The average payment, according to regulator, will be in the neighborhood of $450 per teacher.
The revenue sharing agreements at the heart of the case dated back nearly two decades in some cases, according to evidence supplied by the NYAG's office. The New York State United Teachers union, for example, negotiated its contract with Aetna in 1988 after conducting an RFP that evaluated five providers. Aetna was later acquired by ING.
That contract was most recently renewed in 2004. At that time the union negotiated payments from ING of $6 per member in 2005, rising to $8.50 per member in 2009, the contract's final year. The agreement covered 500,000 members, meaning ING was agreeing to pay the union from $3 million to $4.25 million annually for its endorsement of the ING contract.
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