Another lawsuit involving alleged excessive fees and improper receipt of revenue sharing has been settled, pending approval by the federal district court that heard the case, FRA PlanTools reports. Parties in the class action lawsuit brought by plan sponsors against ING in the Heathcare Strategies case agreed to settle late in the week of April 7. ING will pay $14,950,000 in damages, which is just 2.33% of what was requested at trial.
The trial, which was was held last fall, involved claims that:
• ING selected investments based on their revenue sharing, not their benefit to the plans;
• the receipt of revenue sharing amounts was a prohibited transaction;
• the fees charged were excessive relative to the services rendered; and
• the spread in fixed income products was excessive.
Along with the monetary damages, ING agreed to change its business practices by:
• posting changes to investment lineups;
• disclosing more information about revenue sharing arrangements; and
• resolving issues surrounding dividend reinvestment.
As part of the settlement, 99% of the class must remain in the lawsuit and release further claims against ING for activities regarding:
• revenue sharing;
• float income;
• disclosures;
• investment changes;
• performance of proprietary funds;
• reinvestment of dividends; and
• the fiduciary status of ING related to revenue sharing.
Will this case and other excessive fee cases, like ABB v. Tussey, make plan sponsors and record keepers think twice about the continued use of revenue sharing — especially in light of the DOL’s proposed expanded definition of fiduciary? Do you think revenue sharing will be prevalent in five years, or will we move to R6 or other zero revenue sharing investments? What will be the effect on guaranteed insurance contracts? Share your thoughts in the comment box below.
