MOUNDSVILLE, W. Va. AIG VALIC agents misled many West Virginia state educational system employees into quitting the states defined benefit plan in the early 1990s to invest their retirement savings in a fixed annuity option in the newly launched state defined contribution plan, a lawsuit alleges.
Employees who switched plans would have been much better off had they remained in the DB plan, according to the lawsuit, filed May 12 in Marshall County Circuit Court, Moundsville, W.Va. The lawsuit seeks unspecified compensatory and punitive damages.
The complaint, filed by the Charleston, W.Va.-based law firms Bell & Bands PLLC and Webb Law Firm PLLC, alleges that agents of Houston-based AIG VALIC told plan participants the state DB plan was in grave danger and/or going bankrupt, a prospect that could leave them with no retirement assets. In addition, the complaint alleges that VALIC agents told state employees the companys annuity would double or triple their retirement account balances.
In April 2008, the West Virginia Consolidated Retirement Board, Charleston, which oversees about $10 billion in state retirement assets including the $908 million Teachers Defined Contribution Plan and the $3.6 billion Teachers Retirement Plan, the defined benefit plan advised participants that had they remained in the DB plan, they would have earned significantly more over time and up to their retirement, the complaint said.
The complaint said the law firms are planning to name the retirement board as a defendant.
John Pluhowski, spokesman for AIG VALIC, declined to comment on the lawsuit. But in an e-mail statement, he said the company had been hired by the West Virginia Consolidated Retirement Board in the early 1990s to enroll educators in the defined contribution plan.
AIG VALIC, now known as AIG Retirement, is a unit of American International Group Inc., New York.
VALIC offered a fixed-annuity investment option with a guaranteed minimum return to the plan, Mr. Pluhowski said. We are confident that we met the obligations we were contracted to provide. We are proud to be of service to West Virginia educators.
Anne Werum Lambright, executive director of the West Virginia Consolidated Retirement Board, said she thinks the law firms will have a difficult time proving their case against the retirement board.
She said 4,000 participants moved to the defined contribution plan but could not provide how much in assets was involved.