An ING Groep NV unit that administers 401(k) retirement plans agreed to pay $5.8 million to settle allegations it didn’t tell clients that it would pocket market gains on trades that were delayed.
ING Life Insurance & Annuity Co., a Windsor, Connecticut-based unit of the largest Dutch financial-services company, will pay $5.25 million to about 1,400 retirement savings plans and a penalty of $524,509 to the U.S. government, according to a settlement disclosed today by the Department of Labor.
“All of us who are planning for retirement deserve to know how our savings and investments are being handled, how much is being charged in fees, and how much these transactions impact final account balances,” Acting Secretary Seth D. Harris of the Labor Department said in a statement.
The accord represents the amount ING will pay plans for net gains it retained when there were errors or delays in processing a trade or redemption from a 401(k) account. If the transaction resulted in a loss from the time of the request, ING restored funds to the account, the Labor Department said.
“Our longstanding policy has been to put customers in the position they would have been in had a processing error never occurred,” Joe Loparco, a spokesman for Amsterdam-based ING, said in an e-mail. “We are very pleased to have resolved this matter with the Department of Labor in a way that benefits our client plans and participants, and various stakeholders.”
ING must now disclose in contracts with 401(k) clients its practice of keeping gains on transactions that are incorrect or delayed, according to the settlement. Current plan clients will have 30 days to object to the policy. The company also will report at least once a year the amount of any gains it retained. The Labor Department said it began investigating ING’s practice in 2007 and the settlement involves transactions from 2008 through 2011.
The agency has been focusing on cost transparency in employer-sponsored retirement plans such as 401(k)s. It enacted rules last year requiring detailed disclosure of 401(k) expenses to workers and employers including those for investment management, custody and administration.
The department hasn’t been able to adopt a proposed rule that would have made more 401(k)-plan advisers abide by a so-called fiduciary standard, or put their clients’ best interests first, after objections to its scope by some financial-services companies. The agency withdrew its original proposal in September 2011, having considered comments on it, and has said it will re-propose the regulation this year.
Americans held about $3.5 trillion in 401(k) accounts as of Sept. 30, according to the Investment Company Institute, a Washington-based trade group representing mutual-fund firms.