A federal judge in Connecticut has denied ING U.S.' request for summary judgment, thus enabling a case to go to trial that claims a unit of the company breached its fiduciary duty as a service provider.
U.S. District Judge William Young of the U.S. District Court for the District of Connecticut, denied on Aug. 5 the summary judgment request by ING Life Insurance and Annuity Co. The ING unit was sued by Healthcare Strategies Inc., Plymouth Meeting, Pa., and The DeRosa Corp., Wauwatosa, Wis., alleging breach of fiduciary duty “when it negotiated and received revenue-sharing payment from the mutual funds” that it offers to retirement plans, according to the judge's ruling.
In an interview Wednesday, James Miller, the lead counsel for both plaintiffs, said the original suit was filed in February 2011 on behalf of two 401(k) plans run by Healthcare Strategies. Late last year, the 401(k) plan from DeRosa was added to the complaint. ING is still the provider for DeRosa, but not for Healthcare Strategies, Mr. Miller said.
The judge's decision means a trial could take place in early September, said Mr. Miller, a partner in Shepherd Finkelman Miller & Shah. The lawsuit is a class action.
Gregory Braden, a partner with Morgan Lewis & Bockius, representing ING, declined to comment.
According to Mr. Young's ruling, the ING unit offers 401(k) plans, “also known as its 'group annuity programs,' (which) are designed to attract revenue from various sources, including revenue-sharing payments from mutual funds.” The revenue-sharing payments are made by mutual funds to the ING unit “based on a percentage of the assets invested in the fund by retirement plan participants,” the judge's ruling said.
The plaintiffs allege the ING unit's receipt of revenue-sharing payments from the mutual funds “constituted an impermissible pay-to-play kickback scheme,” the judge's ruling said. They argue the action “violated its fiduciary duty” under the Employee Retirement Income Security Act.