Current Pension Topics: NYSUT Still Owes Members

Current Pension Topics
NYSUT Still Owes Members


The Office of the New York State Attorney General has apparently come full circle in its investigation of an illicit endorsement agreement entered into by the New York State United Teachers (NYSUT) and ING, the giant Dutch financial services conglomerate.

A few months ago Attorney General Eliot Spitzer fined the union $100,000 for the costs his office had incurred in investigating the case. The union also agreed to implement reforms used in its endorsement process.

On Oct. 10, the Attorney General announced that ING would be making restitution payments totaling $30 million to the more-than 50,000 NYSUT members who have over the last 20 years invested in an ING 403(b) Variable Annuity labeled "Opportunity Plus."

The Attorney General found that that ING and the union, in violation of state law, did not adequately disclose the fee arrangement to NYSUT members. Thus, the affected teachers were receiving biased investment advice. Over the years, ING has paid NYSUT about $12 million in fees as an inducement for the union's endorsement of Opportunity Plus. The Attorney General, however, is silent when it comes to the union refunding this money to the affected Teachers. In my view, this money belongs to the Teachers.

As part of the agreement, ING has agreed to fully disclose all fees charged to investors on a cover page. The page will show by illustration how the fees charged impact investment growth over time. Additionally, the page will disclose when ING collects a fee from mutual fund manager in return for making the mutual fund available to Teachers/investors.

Upon learning of the settlement agreement, John Bogle, the founder of the Vanguard Group said: "For too long, workers approaching retirement - for whom investment decisions are absolutely crucial - have been denied clear information that would allow them to make informed decisions. This agreement begins the process of bringing much needed sunlight to the world of retirement products."

The investor has no control over the investment markets. The only thing the investor can control or choose to pay is the costs associated with investing. This is why it is essential for the investor to know all of the costs up front. In this way, the investor is equipped to make informed investment decisions.

Many of you have asked me if it is possible for you to purchase "airtime." Airtime is time credited to your account for which you did not perform your duties. For example you are 62 with 18 years of service. Should you retire, your formula is 1.67 percent times 18, or 30 percent of Final Average Salary (FAS). But if you had 20 years of service, the formula would be 2.00 percent times 20, or 40 percent times FAS. So if you and the city agreed to share equally in the cost of granting you a 40-percent pension rather than a 30-percent one, you could retire at age 62 with 18 years of service. In order to accomplish this, the city must ask Albany to pass the enabling legislation and then the legislation must be signed by the Governor.

Mr. Frank is a fee-only Retirement Financial Planner. He can be reached by telephone at (732) 536-9472, by fax at (732) 536-7373, or via e-mail at rollover@optonline.net.