Compliance February 5, 2013

ING Settles with DOL on Processing Error Policy

ING Life Insurance and Annuity Co. has agreed to settle allegations brought by the Department of Labor (DOL).
Reported by

The department alleged that ING’s failure to disclose its policy on reconciling transaction processing errors to retirement plan clients was a violation of the Employee Retirement Income Security Act (ERISA). The settlement includes a $5.2 million payment to certain retirement plan clients adversely affected by ING’s undisclosed practice of keeping investment gains achieved when the company failed to process requested transactions in a timely manner. The settlement will restore funds to about 1,400 retirement plans.  

In a statement, ING said: “We are pleased to have resolved this matter with the Department of Labor in a way that benefits our client plans and participants, and various stakeholders. Our longstanding policy has been to put customers in the position they would have been in had a processing error never occurred.”  

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The settlement agreement requires that ING make full disclosure of its transactions policy to its current and prospective ERISA plan clients in writing. Current plan clients will be given the opportunity to object to the policy within 30 days of receipt of notice. Prospective plan clients will be informed of the policy by way of its incorporation in ING’s contracts and service agreements.

(Cont’d…)

The disclosure also will state that ING will track the effect of the corrections for each affected plan on an annual basis and will make that information available to its ERISA plan clients. The firm will acknowledge in the disclosure that any gains it keeps as a result of the policy constitute additional compensation for the services the company provides and it will report such compensation in accordance with ERISA Section 408(b)(2).   

According to the settlement, ING also will ensure that any plans deemed to have been abandoned will be properly terminated.  It will attempt to contact the sponsor of each such plan, and if its efforts are unsuccessful, the firm agrees to become that plan’s qualified termination administrator.  

ING added in its statement: “Under terms of the agreement, ING Life Insurance and Annuity Company will continue applying its policy, which was communicated to sponsors during the 408(b)(2) fee disclosures in July 2012 and again recently as part of a sponsor mailing. This resolution with the DOL enhances our broader efforts to increase transparency in the industry and help our clients better understand how their plan services work.”

Products February 5, 2013

Security Benefit Bulks Up VA Options

The investment lineup of Security Benefit Corporation’s EliteDesigns variable annuity has been expanded by 71 fund options to help advisers manage market volatility.
Reported by

Advisers have been asking for investment options that address volatility and tax efficiency, said Michael K. Reidy, vice president and national sales manager of the RIA and independent broker-dealer advisory channel at Security Benefit.

The addition of fixed-income, asset-allocation, global/international and alternative portfolios from fund managers like Dimensional Fund Advisors and JPMorgan, and new underlying funds from existing partners like Guggenheim Investments will provide flexibility for advisers, Reidy said.

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The investment subaccount additions bring the total number of variable account options for the low-cost, fee-only EliteDesigns Variable Annuity to 269.

Other managers of the portfolios are Fidelity Investments, Ibbotson Investments, Innealta Capital, Pioneer Investments, Putnam Investments and Western Asset Management. EliteDesigns gives advisers and their clients a choice of 38 nationally known asset managers investing across 36 Morningstar categories.

“We’re very pleased to be able to offer these brand-new portfolios from investment firms that advisers respect,” Reidy said. He cited Dimensional Fund Advisors, which has more than $250 billion in assets under management, as the fund family to which advisers were most committed for three years running, according to a Cogent Research ranking.

The expansion is timely in light of impending increases to personal income tax rates and the current investment environment, Reidy noted. As investors, particularly those in the top tax brackets, look for cost-effective means to mitigate tax hikes, he feels EliteDesigns may make it easier for advisers to offer a customizable solution that could also help investors reach long-term investment goals.

EliteDesigns combines tax deferral with a fee structure well below that of the average variable annuity and imposes no surrender charges, redemption fees or trading limits (trading rules apply to certain subaccounts).

The increased number and variety of EliteDesigns’ nontraditional and low-correlated investment options, such as the more than 50 alternative strategies, will be useful in creating meaningful strategic and tactical asset allocations that better address investors’ loss aversion in the current post-crisis environment, Reidy said.

More information about EliteDesigns is here.

Security Benefit is a Guggenheim Partners company and provider of retirement savings and income vehicles.

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