A California couple has filed suit against The Variable Annuity Life Insurance Co., an
AIG Inc. subsidiary, claiming the company's sales agents misled investors about the tax advantages of using variable annuities in qualified retirement plans.
Plaintiffs John and Brenda Hall claim 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 suit filed in the U.S. District Court in Arizona 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 are not 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's also a costly decision since 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 claim accuses VALIC and its agents of making material misrepresentations and failure to disclose material facts.
The Halls are suing on the 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 were not immediately returned.
Linda Skolnick, manager of corporate communications at Retirement Services Inc.— the
AIG unit that comprises VALIC and SunAmerica Life Assurance — wrote in an e-mail that while VALIC is aware of the lawsuit, it hasn't received a notice of service yet.
She wrote that VALIC "understands that the Hall lawsuit alleges facts and claims that appear to be identical to the same alleged in James Drnek and Maureen Tiernan, et al. v. VALIC, et al., another class action lawsuit that was dismissed by a United States District Court in Arizona in 2005."
"As was the case in Drnek, VALIC believes these allegations to be without merit, and we anticipate a favorable resolution to the case," Ms. Skolnick wrote.
