Union Central to Pay $2.25M ERISA Class Action Lawsuit Settlement

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A federal judge on Monday granted preliminary approval to a $2.25 million class action lawsuit settlement between Union Central Life Insurance Co. and employees of Butler National Corp. and C3 Capital LLC, who claim that the insurer improperly received kickback payments and engaged in pay-to-play deals with mutual fund companies that harmed employees invested in 401(k) retirement plans.

Union Central Life Insurance has since merged with Ameritas, also named as a defendant in the class action lawsuit.

The issues raised in the Union Central class action lawsuit were alleged violations of the Employment Retirement Income Security Act (ERISA) regarding transaction fees and the duty to include mention of fiduciary issues. In the original ERISA class action lawsuit, it was argued that any mutual fund group that wished to work with the company would have to pay a percentage of the Union Central-controlled money back in order for their products to be offered.

In addition to not being mentioned to the people who may be affected by the “pay-to-play” scheme, the Union Central ERISA class action lawsuit also noted that the revenue sharing payment have the effect of “increasing the expense ratios of the mutual funds, which expenses are deducted directly from the assets of the separate accounts.”

Companies like Union Central are allowed to charge service fees for certain things, but “the amount of the revenue sharing payments bears absolutely no relationship to the cost of value of and such services,” the complaint alleges. It went on to note that the alleged kickback money the firm received from mutual funds, including named defendant Ameritas, did not result in lower costs for the employees whose 401(k) accounts they were handling.

The plaintiffs are represented by class action lawsuit lawyers from Goldenberg Schneider LPA, Shepherd Finkelman Miller & ShahLLP and Edgar Law Firm LLC.

The Union Central ERISA Class Action Lawsuit is Butler National Corp., et al. v. Union Central Life Insurance Co., et al., Case No. 12-cv-00177, in the U.S. District Court for the Southern District of Ohio.