DOL Slams ING Life and Annuity With $5.2M Fine

Under terms of the agreement, ILIAC said the 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."

ILIAC is an insurance company with approximately 35,000 ERISA-covered plan clients. It has offices in Connecticut and provides, among other things, custodial and third-party administration services to defined contribution plans that are sponsored by businesses.

"The $5.2 million that ILIAC has agreed to pay represents net gains kept by the company that resulted from the manner in which certain transaction processing errors were handled during the 2008-2011 period," DOL said. The department alleged that this service provider's failure to disclose its transaction error correction policy to its ERISA plan clients resulted in it receiving compensation in violation of the act.

"It has been ILIAC's practice to keep gains derived from processing transactions that it failed to timely process as of the contract date as well as from re-processing erroneous transactions," DOL said. "In both instances, ILIAC makes corrections using the date required by its contract. Gains and losses result when the share or unit value differs between the contract date and the actual trade date. Any gains in share or unit value between the contract date and trade date are kept by ILIAC, whereas ILIAC is obligated, by contract, to make plans whole for any losses." According to DOL, the settlement agreement requires that ILIAC 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 ILIAC's contracts and service agreements.

The disclosure, DOL said, also will state that ILIAC 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. "ILIAC 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)," DOL said.

According to the settlement, ILIAC 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, ILIAC agrees to become that plan's qualified termination administrator.