FORBES MAGAZINE -
Billion-Dollar Retirement Rip-Off
Neil Weinberg, 11.27.06
In a move that could have far-reaching consequences for a $140 billion industry, the Orange County, Fla., Sheriff’s Office has filed a class action charging units of Nationwide Financial Services with receiving illegal kickbacks from fund companies whose products it included in public employee retirement plans.
The suit, filed in United States District Court for the Southern District of Ohio, near Nationwide’s (nyse: NFS - news - people ) headquarters, seeks as much as several hundred million dollars and aims to include as plaintiffs some 7,600 other public employee retirement plans that are Nationwide customers.
The suit involves so-called 457 retirement savings plans, which are a public-sector equivalent of the 401(k). The 457 market, with $143 billion in assets, is dominated by variable annuities, which are bundles of mutual funds or separately managed accounts bundled into life insurance policies by Nationwide and other vendors. Variable annuities have been widely criticized as poorly disclosing what are sometimes excessive fees.
The Orange County suit claims that over the past decade and a half, Nationwide received kickbacks from the firms whose funds it included as investment options based on a percentage of plan assets gathered. Insurers refer to the payments as revenue sharing. To critics, they smack of pay-for-play. In the Orange County Sheriffs’ case, Nationwide’s fees were frequently equal to 2% to 3% of assets annually. The plan recently switched to a Vanguard-based plan that cut fees by roughly two-thirds.
Tuesday, November 28, 2006
RETIREMENT
An article that one of our readers felt was important reading. We couldn't agree more.
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2 comments:
If it is happening in Orange Co.,Florida just imagine what kind of kickbacks are being given in this filthy, corrupt city!! The kicker is that it IS so corrupt, no one unsoiled left to investigate.
Thanks for posting this though I woulda thought more people would be commenting and SCC would have a thread up. YOU SCOOPED HIM!!
No more health care, no more pension. Thats o.k. I'll just load up that deferred comp. Uh oh, wait a minute....
"The class-action suit, which seeks to recover potentially hundreds of millions of dollars, alleges that in the early 1990s and continuing to present day, Nationwide devised a plan to essentially take a percentage from fees paid to mutual fund families."
"This could set the stage for a multibillion dollar showdown," Local 6's Mike Holfeld said. "At least 7,600 retirement plans held by firefighters, teachers and sheriff's deputies are impacted by this."
http://www.local6.com/news/10366416/detail.html
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