Compliance February 28, 2011

ING Facing Revenue Sharing Suit

Healthcare Strategies Inc. is accusing ING Life Insurance and Annuity Company of violating the prohibited transaction rules of the Employee Retirement Income Security Act (ERISA).
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According to the suit filed in the U.S. District Court for the District of Connecticut, ING entered into revenue sharing agreements with various mutual funds, affiliates of mutual funds, mutual fund advisers, and others in which it receives kickbacks for its own benefit. Healthcare Strategies says the payments are part of a pay-to-play scheme in which ING receives payments in the form of 12b-1 fees, administration fees, and other fees in return for providing the entities access to its retirement plan customers.  

In its complaint, Healthcare Strategies claims the revenue sharing payments have the effect of increasing the expense ratios of mutual funds offered in its 401(k) plan and all other plans similarly situated. According to the suit, while ING describes the payments as service fees, “the amount of the revenue sharing payments bear[s] absolutely no relationship to the cost or value of any such services.”  

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The action seeks equitable relief and damages under ERISA for the Healthcare Strategies plan as well as all other plans similarly situated, including disgorgement and/or restitution of the revenue sharing payments and other compensation improperly received by ING.  

The complaint is here.
The Markets February 28, 2011

529 Assets Reach $138B in Q4 2010

Over the last twelve months, 529 plan assets have increased by 18.1%, reaching an estimated $138 billion in the last quarter of 2010.
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There was an 8.2% increase from 3Q10 assets of $128 billion, according to Financial Research Corporation.

FRC reports that the top 529 savings plans by 4Q10 assets are Virginia’s CollegeAmerica, with $29.85 billion in assets; New York’s College Savings Program – Direct, with $9.28 billion; Rhode Island’s CollegeBoundfund, with $7.67 billion;  New Hampshire’s UNIQUE College Investing Plan, $6.55 billion; and Maine’s NextGen College Investing Program – Advisor, $5.49 billion.  

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American Funds, which manages Virginia’s program, was the top 529 program manager by 4Q10 assets with $29.85 billion in assets; followed by Upromise Investments, which manages programs in 11 states, with $26.74 billion in assets. Fidelity, which manages programs in five states ($14.33 billion); AllianceBernstein, which manages the Rhode Island program ($7.67 billion); and TIAA-CREF, which manages programs in 11 states ($7.37 billion), rounded out the top five. 

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