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ING to Pay $5 Million to Settle Allegations of ERISA Disclosure Violations

Tuesday, February 5, 2013

The Labor Department announced Feb. 4 that it reached a $5.2 million settlement with ING Life Insurance and Annuity Co. to compensate the company's retirement plan clients for ING's undisclosed practice of retaining investment gains achieved when the company failed to timely process transactions.

According to DOL, ING's failure to disclose its policy on reconciling transaction processing errors violated the Employee Retirement Income Security Act.

In addition to the $5.2 million settlement, which represents gains generated by its treatment of transaction processing errors, ING agreed to pay $524,509 in civil penalties, disclose its transactions policy to current and prospective ERISA-plan clients, and adopt procedures to terminate plans through the Employee Benefits Security Administration's Abandoned Plan Program.

Processing Practice Generated Gains and Losses

ING provides custodial and third-party administration services to about 35,000 ERISA-covered plan clients. ING, as part of an internal policy, retains gains derived from transactions that failed to timely process and from reprocessing erroneous transactions. ING used the date required by its contracts when these transactions occurred, which caused gains and losses when the share or unit value differed between the contract date and the actual trade date. ING's contracts obligated it to restore plan losses, but ING kept any gains from the transactions.

The Labor Department alleged that ING violated ERISA by failing to disclose the gains it achieved from the transaction processing errors. As part of the settlement, ING agreed to pay $5.2 million to retirement plan clients affected by the internal policy. According to DOL, the $5.2 million represents the net gain ING retained from the internal policy from 2008 to 2011.

The settlement also requires ING to disclose the policy to current and prospective ERISA-plan clients, grant existing clients an opportunity to object to the policy, and allow prospective clients to incorporate the policy into contract and service agreements. Additionally, ING is required to disclose to clients that the gains it keeps under the policy are additional compensation for ING's services and that the compensation is being reported in accordance with ERISA Section 408(b)(2). ING also agreed to contact plan sponsors and serve as a qualified termination administrator for any plan deemed abandoned.

According to the Labor Department, the settlement would restore funds to 1,400 retirement plans impacted by the ING policy.


The full text of the DOL announcement is at http://www.dol.gov/opa/media/press/ebsa/EBSA20130071.htm.

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