A California couple has filed suit against The Variable Annuity Life Insurance Co., an American International Group Inc. subsidiary, claiming that the company's sales agents misled investors about the tax advantages of using variable annuities in qualified retirement plans.
Plaintiffs John and Brenda Hall say that they each bought a variable annuity for inclusion in their 403(b) tax-deferred retirement plans. The Halls are both public school teachers in Atwater, Calif.
In a class action filed in U.S. District Court in Arizona on Dec. 21, the Halls alleged that VALIC and affiliate Variable Annuity Marketing Co. trained its agents to target 403(b) plan participants as sales prospects for variable annuities even though the products aren't suited for such retirement plans.
Both variable annuities and qualified retirement plans grow on a tax-deferred basis, so variable annuities don't provide any tax advantages when included in such plans. It is also a costly decision because clients are also paying fees on the variable annuities and face surrender charges for untimely withdrawals.
The Halls argue that because VALIC's sales representatives presented themselves as knowledgeable financial advisers — rather than insurance agents — they and other clients trusted them and bought variable annuities that they otherwise wouldn't have purchased.
The complaint accuses VALIC and its agents of making material misrepresentations and failure to disclose material facts.
The Halls are suing on behalf of all individuals who bought a VALIC deferred annuity after Jan. 1, 1974, in order to fund a qualified retirement plan.
Others named in the suit include VALIC Financial Advisors Inc., VALIC Separate Account A, and a slate of former and current VALIC executives, including former chairman and chief executive John A. Graf.
Phone calls to plaintiff's attorney Robert B. Carey of Hagens Berman Sobol Shapiro LLP and Linda Skolnick, manager of corporate communications at Retirement Services Inc. — the AIG unit that comprises VALIC and SunAmerica Life Assurance — weren't returned.
E-mail Darla Mercado at firstname.lastname@example.org.