ING Life Reaches $15 Million Settlement in Revenue-Sharing Lawsuit
October 1, 2014 by Thomas Harman
HARTFORD, Conn. – The ING Life Insurance and Annuity Co. will pay $14.9 million to plaintiffs in compensatory funds and implement business practice changes to settle a class-action lawsuit, after a Connecticut federal judge’s ruling.
Judge William G. Young of the U.S. District Court for the District of Connecticut issued a final approval to the settlement between ING Life and Healthcare Strategies Inc.
The settlement ends nearly four years of litigation, with Healthcare Strategies alleging ING Life entered into revenue-sharing pacts with mutual funds and their affiliates. The initial lawsuit alleged ING received payments from the mutual funds that amounted to kickbacks and violated the Employees Security Retirement Income Act. In exchange for payments ING received, the mutual funds were given access to retirement plan customers, the lawsuit said.
As part of the settlement, ING Life will deposit $14.9 million in a common fund to compensate plaintiffs. Business practices ING agreed to make include requiring ING Life to identify addition or removal of a fund to a plan’s product menu and to disclose mutual fund-related fees and expenses in new customer proposals. ING Life must begin implementing the changes in six months and implement them within one year. The changes have a value ranging anywhere from $344.3 million to $559.8 million in savings.
Only 19 members of the class of 31,558 elected to exclude themselves from the class when given the option to accept the settlement, according to the final decision.
The litigation began in February 2011 when ING Group was Voya Financial’s parent company and Voya operated as ING Group’s U.S.-based subsidiary under the name ING U.S. In 2013, ING U.S. divested from ING Group via an initial public offering and now operates as Voya Financial as an independent company, although ING Group remains a Voya Financial shareholder.
“This settlement helps avoid the additional expenses, distraction and uncertainties associated with continued litigation, while providing substantial and meaningful benefits to the members of the class,” Voya said in a statement. “Our retirement plan business has long been a leader in the disclosure of plan fees and costs. Under the agreement, we will further enhance how financial arrangements with fund groups relate to the fees paid by plans.”
The settlement announcement comes just weeks after ING Group agreed to sell 30 million shares of Voya Financial Inc. common stock valued at US$1.2 billion (Best’s News Service, Sept. 3, 2014).