New York State Attorney General Eliot Spitzer has been claiming plenty of credit lately for championing his state’s teachers and forcing insurer ING to pay $30 million for foisting costly annuities on them under false pretenses.
But the settlement is likely to do a lot more for Spitzer’s gubernatorial ambitions as he gears up for next month’s general election than it does for the 66,000 state teachers ripped off by ING and their own union.
That’s because while Spitzer reaps a public relations windfall, the compensation is unlikely to come anywhere close to repaying teachers for the overcharging they have suffered or the years of opportunity they have lost by not investing in cheaper, better-performing products. What’s more, only after Forbes began inquiring last week about surrender fees of as much as 5% did ING agree to waive them entirely, according to a spokesman for the attorney general’s office.
The issue was originally set off by a Forbes magazine story, titled “Costly Lesson,” in April 2005. It outlined how ING was paying the New York State United Teachers (NYSUT) $3 million a year to hype its annuities to member teachers. The program involved a retirement plan known as a 403(b), which is a public-sector cousin of the 401(k). Inside it, ING was selling variable and fixed annuities, which are mutual funds and bond-like investments wrapped in life insurance that, in policies like ING’s, cost several times more than low-cost alternatives and provide minimal coverage. Forbes’ story prompted Spitzer’s office to subpoena NYSUT and ING on their relationship.
Investigators concluded that the $3 million annual payment from ING to the NYSUT Member Benefit’s unit was to gain exclusive access to union members. The union, in turn, concealed the under-the-table payments and the fact that events it portrayed as “investment seminars” were actually ING-sponsored sales pitches, according to the findings of the attorney general’s office. ING used the arrangement to amass $2.5 billion in retirement savings contributions from NYSUT teachers.