The settlement stems from a year-long investigation into ING’s relationship with New York’s largest teachers’ union, New York United Teachers (NYSUT). The relationship worked out in the following manner:
The Attorney General’s office determined that ING had made
payments of as much as $3 million per year to NYSUT as inducement for the union to endorse and promote ING group annuity plans. The full extent of these payments was not disclosed to members, nor were members aware that the union was steering them into the ING plan with biased investment advice.
The NYSUT agreed to a “series of reforms and payment of $100,000 in costs.” More importantly ING has agreed to the following changes:
To set a new industry standard for retirement product disclosure by providing a simple cover-page summary of all the costs of each plan it offers. This disclosure will include a chart demonstrating the impact that these costs have on long-term investments. On this disclosure page, ING will also explain that mutual fund managers often pay ING to have their funds appear on the menu of options offered to investors.
As part of the settlement, ING will also pay $30 million as restitution directly to NYSUT members who participated in the ING plan, a so-called 403(b) plan. Each participant will receive a portion of this fund calculated on the basis of that participant’s investment history. The average payment will be approximately $450, but every teacher participating in the plan will receive at least $100.
These changes will allow more transparency for investors when the average investor is already struggling with growing their money and having enough for retirement. Whether or not other companies apply similar changes of their own volition remains to be seen.
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