Union Settles Annuity Probe
New York's largest teachers union agreed Tuesday to change the way it markets individual retirement plans to its members, ending what authorities called a "silent partnership" with insurer ING Group that saddled teachers with high-cost investments that provided scant benefits.
New York State United Teachers received $3 million a year for endorsing ING annuities but tried to conceal the arrangement from its members, according to the New York attorney general's office. The annuities carried fees and expenses of as much as 2.85% a year, or about three times the cost of many popular mutual fund investments.
"Under the guise of giving objective advice, the union not only endorsed this product, they steered people to it," said David D. Brown, chief of the attorney general's investment protection division. "They ultimately became a sales arm of the insurance company."
As part of a settlement with the state, the union agreed to disclose its endorsement payments. It also promised to work with state authorities to hire an independent consultant to suggest alternative investments to union members and to pay $100,000 to cover costs of the state investigation.
In addition, the union agreed to provide members with annual access to free and objective investment advice and allow the 53,000 people who purchased retirement products it endorsed in the past to roll their balances into a newly endorsed product at no cost.
The union's deal with ING was spotlighted in an April 25 Los Angeles Times story that detailed how some of the nation's largest teachers unions, including United Teachers Los Angeles, endorse high-cost retirement investments from companies that give them financial support. These investments, which supplement teacher pensions, often wind up providing paltry returns because of high fees that are charged as a percentage of the assets.
Richard C. Iannuzzi, president of New York State United Teachers, credited The Times story for helping make union leaders aware of the need to better disclose endorsement deals.
"Your exposure, and others who started to raise questions about the insurance and financial industries, led me to ask questions about how we handled the issue of disclosure here," he said. "Your article in particular played an important role in our understanding of the issue."
