Retirement Plan Hit: NYSUT Fined For Deceiving Members

Retirement Plan Hit
NYSUT Fined For Deceiving Members

By HOWARD MEGDAL

Attorney General Eliot Spitzer has fined New York State United Teachers $100,000 for promoting an inferior 403(b) program from ING in exchange for annual payments to the union of up to $3 million.

ELIOT SPITZER: Scolds NYSUT on conflict. NYSUT had been receiving substantial payments, going back to 1989, initially from Aetna Life Insurance and Annuity Company and, in recent years, from the Dutch firm ING, in exchange for promoting the companies' retirement plans to its members.

Will Appoint Overseer

Under the agreement, which the Attorney General's Office announced June 13, NYSUT agreed to retain an independent overseer approved by Mr. Spitzer to monitor the union's Benefits Trust. The consultant will determine if "it is in the best interests of NYSUT's members" to endorse any retirement plans, and if so, ensure that such plans are thoroughly compared to others on the market.

At the time the investigation began last year, no full comparison of plans had been conducted by the Trust since 1998. Members had not been informed of the financial arrangement between the union and ING.

The Chief-Leader/Alana Marcu SPECIAL TREATMENT: Nassau County Executive Tom Suozzi criticized his rival for the Democratic gubernatorial nomination, State Attorney General Eliot Spitzer, for what he said was an overly lenient penalty against the New York State United Teachers at a time when the union appears certain to endorse Mr. Spitzer. "It's clear now that the Trust, despite its best intentions, historically could have - and should have - provided greater disclosure of the fees paid to the trust by ING," NYSUT President Richard C. Iannuzzi said in a June 13 statement. "Mistakes were made. They will not be made again."

The ING plan, according to the AG's report, provided a return of $183,077.47 on an annual contribution of $10,000 from 1994 to 2005. A competing plan, by virtue of lower fees, provided a return of $200,282.91.

UFT Wasn't Involved

Non-city NYSUT members pay 3.59 percent of their invested annual assets toward the ING 403(b) plan, while other programs are available for as little as 0.35 percent of annual assets.

RICHARD IANNUZZI: 'Mistakes were made.' United Federation of Teachers President Randi Weingarten, whose union is affiliated with NYSUT but did not participate in the ING arrangement, distanced herself from her state sister's actions.

"It's gratifying that the Attorney General clearly notes in his investigative report and settlement that neither the UFT nor its members were involved in the NYSUT Benefit Trust's transactions with ING," she said in a June 13 statement. "At the same time, it's important that the NYSUT Trust has admitted mistakes and is taking the necessary steps to correct the situation."

Mr. Spitzer was set to receive NYSUT's endorsement at the union's convention last month, but when the investigation came to light, he postponed his acceptance until the inquiry's conclusion.

Suozzi: Spitzer Went Easy

Nevertheless, the penalty drew fire from Mr. Spitzer's opponent for the Democratic nomination for Governor, Nassau County Executive Tom Suozzi, who compared the NYSUT case to the Attorney General's more vigorous pursuit of H & R Block over that company's pushing low-reward financial services to customers.

"This is becoming what might be called double standard practice for Eliot Spitzer," Mr. Suozzi said June 15 at a press conference outside of the Attorney General's Manhattan offices. He called on Mr. Spitzer not to accept any endorsements or contributions from any group under investigation, or ever investigated by Mr. Spitzer.

Mr. Suozzi did not acknowledge the difference between the NYSUT arrangement and the H & R Block plan currently under investigation, which Mr. Spitzer has described as "virtually guaranteed to lose money" due to low interest rates and high fees. Mr. Suozzi said he would not refuse contributions or an endorsement from NYSUT.

"I'll accept any contributions, legal contributions," Mr. Suozzi said. "It doesn't matter anyway - they aren't endorsing me."

ING Not Out of Woods

A spokesman for Mr. Spitzer did not return a call seeking comment.

The settlement between the AG's office and NYSUT did not involve ING, and despite a company spokesperson's claim that "it has been ING's practice to disclose the specifics of its relationship with NYSUT member benefits," Mr. Spitzer's office indicated that the scrutiny will continue.

"There will be further developments in the investigation," AG spokesperson Darren Dopp told the New York Times.