Remember
the whole brouhaha over the ING Group, 403(b)s and the New York State United Teachers? The New York attorney general discovered that NYSUT endorsed high-fee ING annuities for its members, but didn't reveal that the union was receiving payments from ING. This arrangement received
criticism from all corners and the ultimate settlement required ING to refund $30 million to union members who invested in the annuities.
So, everything worked properly, right? The deal was uncovered in an April 2006
Los Angeles Times story, the attorney general got on it and justice was done. But what took so long? While digging through the EIA archives searching for something else, I came across this lead story from the
EIA Communiqué of October 2, 1997:
"Aetna Insurance Company offers its Opportunity Plus retirement annuity exclusively through New York State United Teachers (NYSUT) - an American Federation of Teachers (AFT) affiliate. The program is endorsed by NYSUT and offers reduced commission rates. In compliance with the law, Aetna states that 'All of the contributions received by Aetna on behalf of participants are invested in the participants’ accounts in the investment options selected by participants. No portion of their contribution is returned to NYSUT.'
"However, in exchange for this exclusive arrangement, Aetna does make payments to NYSUT. According to the Opportunity Plus prospectus, 'NYSUT is reimbursed for direct out-of-pocket expenses incurred in the promotion of the Opportunity Plus program up to a maximum of $75,000 per year. In addition, the Company will pay NYSUT between $30,000-$42,000 per month from 1994 through 1998. NYSUT has indicated to the Company that it intends to use these amounts to enhance benefits to the membership.' This arrangement sheds some light on endorsement agreements that are far from uncommon among union affiliates. An annual payment of $435,000 to $579,000 to an affiliate the size of NYSUT is not chump change. It also suggests that the way to determine union income from these arrangements is to avoid the vague and convoluted union documentation, and go instead to the data of the private firm offering the benefit, who must explain the arrangement to its stockholders."
The ING Group acquired Aetna's financial services in 2000 and assumed the NYSUT Opportunity Plus contract.
So, if I could find it in 1997 - a mere three months after founding EIA - why did it take the New York attorney general's office another nine years to learn about it?