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Stable Value Fees Again Draw Excessive Fee Suit

While a number of recent excessive fee suits have challenged the lack of a stable value offering, a new suit is challenging the fees charged by a stable value fund provider.

In this case, a participant of the Cedars-Sinai Medical Center 403(b) Retirement Plan has filed suit against Voya Retirement Insurance and Annuity Co. on behalf of that plan, and on behalf of “all other similarly situated employee pension benefit plans covered under the Employee Retirement Income Security Act of 1974,” claiming that Voya “collects hundreds of millions of dollars annually in undisclosed compensation from the retirement plans and participants to whom it owes the highest duties known to law and certain statutory disclosure obligations.”

The suit, filed in the U.S. District Court for the District of Connecticut (Dezelan v. Voya Retirement Ins. & Annuity Co., D. Conn., No. 3:16-cv-01251, complaint filed 7/26/16), alleges that in setting and resetting the crediting rates applicable to the stable value accounts offered by Voya, and setting the amount of and keeping the Income, and in thus determining its own compensation, Voya has breached its fiduciary duties to the plans and their participants.

The suit claims that Voya had complete discretionary control over the undisclosed GSA Spread of as much as 3.2%, and that because Voya “in its sole fiduciary discretion sets the SVA Crediting Rates, and because the Income is profit to Defendant, in exercising its fiduciary discretion to set the Income, Defendant exercises fiduciary discretion to set its own fees and profits related to the Plans’ deposits into the SVAs,” and that “in determining the level of its own compensation, Defendant deals with plan assets in its own interest or for its own account.”

Moreover, the suit claims that not only does that compensation that Voya takes for itself reduce the investment return on plan assets, but that “defendant’s non-disclosure of the amount of the Income gave it a competitive advantage over other Plan service providers who disclosed all of their fees.”

Izard Kindall & Raabe LLP — formerly Izard Nobel LLP — and Bailey & Glasser LLP represent the investors suing Voya. According to BNA Bloomberg, the firms are currently litigating similar claims against Prudential Retirement Insurance & Annuity Co. and New York Life Insurance Co. Izard is also suing Massachusetts Mutual Life Insurance Co.

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