Hartford Agrees to $13.8M Revenue-Sharing Case Settlement

Lawyers for Phones Plus Inc. have asked U.S. District Judge Alfred V. Covello of the U.S. District Court for the District of Connecticut to approve the settlement.

On behalf of its 401(k) plan, Phones Plus Inc. sued Hartford and investment firm Neuberger Berman Management Inc. in 2006, alleging that Hartford’s receipt of revenue-sharing payments from mutual funds based on a percentage of plan assets invested in those funds violated the Employee Retirement Income Security Act (ERISA). Phones Plus alleged that Neuberger committed an ERISA breach by not properly informing the plan of the revenue-sharing arrangement.

The request submitted to Covello said if the settlement pact is approved, all 401(k) plans using Hartford as a service provider between November 2003 and the date of the settlement approval would share in the settlement proceeds.

In addition to the fine, Hartford agreed to change several business practices, including:

• taking provisions out of plan documents limiting a plan’s selection of investment options;
• not enforcing provisions allowing it to invest plan assets in short-term money-market instruments, cash, or cash equivalents;
• asking state insurance regulators for the OK to change parts of its group annuity contract dealing with mutual fund availability to clarify that Hartford will not take out or substitute an investment option chosen by a plan, unless the option is no longer available;
• adding language to its plan disclosures to make clear that the fund options offered in the plan submit revenue sharing payments to Hartford or its affiliates; and
• giving plans a list of investment options with revenue sharing amounts paid by each.