A federal district court in Connecticut ruled that the DC plan administrator is a fiduciary related to its revenue sharing practices regarding funds in a group annuity it manages. As part of the arrangement, ING has the ability to change, add and eliminate investments, and only has to notify the plan sponsor. The court dismissed ING’s motion for summary judgment and ordered the trial to proceed on Sept. 3.
The case, Healthcare Strategies v. ING, had already been certified as a class action for all employers using ING as their plan administrator under similar group annuity programs. For the most part, previous class actions have been certified for all participants in a plan.
The plaintiff/plan sponsor alleged that ING included funds in its group annuity/wrap program based on the revenue sharing it receives rather than including funds that would most benefit the plan — amounting to a prohibited transaction. It also alleged that the fees charged did not have a meaningful relationship to the services provided, resulting in excessive compensation, and that keeping the spread on what it made from the GIC and what was guaranteed amounted to self-dealing.
In the 7th Circuit’s Leimkueher v. AUL decision, the provider’s liability and fiduciary status was limited to incidents where changes were actually made to the fund lineup. In the ING decision, the Connecticut court, relying on decisions by the 2nd Circuit in which it resides, ruled that ING is a fiduciary based solely on its ability to make changes. While it’s likely that the ruling will be appealed, it is nonetheless significant for providers managing group annuity contracts — as is the class action status of all plan sponsors using a provider under this arrangement.