ING to Pay $415M to Settle Mutual Fund Kickback Class Action Lawsuit

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ING will, and has already begun to, make massive changes to how it discloses information regarding fees and other information regarding recommended investments to settle a mutual fund kickback class action brought by several retirement administrators. The cost of the changes ranges up to $400 million, while Class Members will receive roughly $15 million.

The Class argued, according to the order granting certification to the ING class action lawsuit, “that [ING] uses its control over account options and investments to obtain revenue sharing payments from mutual funds and to engage in other self-dealing in violation of ERISA[.]” The key to the Employee Retirement Income Security Act violation is whether or not a financial services institution like ING has a fiduciary duty to act in the best interest of its customers.

The judge then cited case law indicating that because the company could add or remove mutual funds at will without a customer being able to terminate the contract determines its status as a fiduciary. Further, the Department of Labor wrote ING’s predecessor that “it could be a fiduciary if it retained the authority to change the menu of available investment options unless it provides advance notice of any change and permits plan fiduciaries to reject the change and terminate services without penalty.”

The $400 million figure does not just come from changes to the documentation that ING will include to resolve the kickback claims, but also the expected improved rate of return for investors who use 401(k) retirement plans and are able to choose better options for their needs.

It also comes in the wake of a number of cases that similarly revolve around the fiduciary duty that includes not receiving payments from mutual fund companies in return for offering their products. The class action attorneys who represented the Class here also obtained a settlement with Union Central Life Insurance in May. A judge recently certified a Nationwide Life Insurance mutual fund class action lawsuit as well. However, the Nationwide case does not involve 401(k) retirement plans but rather variable annuities, although the other claims are similar.

The Class is represented by James E. Miller, Laurie Rubinow, Karen M. Leser-Grenon, Scott R. Shepherd, James C. Shaw, Rose F. Luzon and Kolin C. Tang of Shepherd Finkelman Miller & Shah LLP.

The ING Mutual Fund Kickback Class Action Lawsuit is HealthCare Strategies Inc., et al. v. ING Life Insurance & Annuity Co., Case No. 3-11-cv-00282 in the U.S. District Court for the District of Connecticut.