Labor Life Insurance fined $20 million

Union Labor Life Insurance Co. today reached a $20 million settlement with the Department of Labor, following a five-year investigation of the firm’s retirement plan fees. Of that total, $16.7 million will be returned to investors in Separate Account J, a pooled separate account holding plan assets for employee benefit plan investors. Separate Account J invests in secured mortgages on real estate development projects that are built with union labor, and ERISA-covered plans are the only investors. The remaining $3.3 million goes to an escrow account to pay civil penalties and excise taxes. The Washington-based company was accused of failure to disclose its compensation and receive approval from independent plan fiduciaries for funds taken from the investment account, as well as payments from third-party borrowers. The Labor Department’s 2002 investigation started with the firm’s pension plan. At the time, the firm’s compensation arrangements for Separate Account J were created under a different management. ULLICO said that its current management has cooperated with the Labor Department, and has not admitted to violating the law. The Department of Labor said that Union Labor Life kept millions of dollars from loan applicants who did not go forward with their loans, even though the plans took on the risk of funding them. Additionally, Union Labor Life will be barred permanently from retaining compensation in relation to Separate Account J without advance disclosure of the compensation and independent plan fiduciary approval, the Labor Department said. “Self-dealing by pension fiduciaries at the expense of workers’ retirement plan cannot be tolerated,” said Secretary of Labor Elaine L. Chao, in a statement. “This $20 million settlement is a loud and clear message to all plan fiduciaries that they will be held accountable when their actions are detrimental to workers’ benefit plans.”