The Department of Labor announced Monday that it had reached asettlement agreement with ING Life Insurance and Annuity Co. thatprovides for a $5.2 million payment to certain retirement planclients adversely affected by ILIAC’s failure to discloseinvestment gains achieved when the company failed to processrequested transactions in a timely manner.

The department alleged that ILIAC’s failure to disclose itspolicy on reconciling transaction processing errors to retirementplan clients was a violation of the Employee Retirement IncomeSecurity Act.

Acting Labor Secretary Seth Harris said in a statement that this“settlement will restore funds to about 1,400 retirement plans andultimately benefit hardworking Americans who are making sacrificesnow in order to save for their retirement years.”

Harris continued: “All of us who are planning for retirementdeserve to know how our savings and investments are being handled,how much is being charged in fees and how much these transactionsimpact final account balances.”

Phyllis Borzi, assistant secretary of labor for EBSA, said inthe same statement that the settlement “is reflective of myagency’s commitment to enforcing requirements for transparency inthe retirement savings marketplace. Failure of a plan fiduciary todisclose the revenue it received from managing retirement plans isa disservice to employers who are providing this benefit to theirworkers.”

The agreement announced Monday also requires ILIAC to discloseits policy on how it corrects transaction processing errors to planclients covered by ERISA and to adopt procedures for terminatingabandoned plans through the EBSA’s Abandoned Plan Program. Inaddition, ILIAC has agreed to pay a $524,508.73 civil penalty.

ILIAC is an insurance company with approximately 35,000ERISA-covered plan clients. It has offices in Connecticut andprovides, among other things, custodial and third-partyadministration services to defined contribution plans that aresponsored by businesses.

“The $5.2 million that ILIAC has agreed to pay represents netgains kept by the company that resulted from the manner in whichcertain transaction processing errors were handled during the2008-2011 period,” DOL said. The department alleged that thisservice provider’s failure to disclose its transaction errorcorrection policy to its ERISA plan clients resulted in itreceiving compensation in violation of the act.

“It has been ILIAC’s practice to keep gains derived fromprocessing transactions that it failed to timely process as of thecontract date as well as from re-processing erroneoustransactions,” DOL said. “In both instances, ILIAC makescorrections using the date required by its contract. Gains andlosses result when the share or unit value differs between thecontract date and the actual trade date. Any gains in share or unitvalue between the contract date and trade date are kept by ILIAC,whereas ILIAC is obligated, by contract, to make plans whole forany losses.”

According to DOL, the settlement agreement requires that ILIACmake full disclosure of its transactions policy to its current andprospective ERISA plan clients in writing. Current plan clientswill be given the opportunity to object to the policy within 30days of receipt of notice. Prospective plan clients will beinformed of the policy by way of its incorporation in ILIAC’scontracts and service agreements.

The disclosure, DOL said, also will state that ILIAC will trackthe effect of the corrections for each affected plan on an annualbasis and will make that information available to its ERISA planclients. "ILIAC will acknowledge in the disclosure that any gainsit keeps as a result of the policy constitute additionalcompensation for the services the company provides and it willreport such compensation in accordance with ERISA Section408(b)(2)," DOL said.

According to the settlement, ILIAC also will ensure that anyplans deemed to have been abandoned will be properly terminated. Itwill attempt to contact the sponsor of each such plan, and if itsefforts are unsuccessful, ILIAC agrees to become that plan’squalified termination administrator.