NYSUT Agrees to Retirement Plan Reforms to End Probe
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.
ALBANY, N.Y. (AP) – The state’s largest teachers union will pay $100,000 and adopt a series of reforms to end an investigation by Attorney General Eliot Spitzer’s office into its practice of steering retirement investment business to a Dutch financial company.
Under an agreement with ING, the New York State United Teachers union gets $3 million a year for urging its members to enroll in retirement plans that critics say charge high fees that erode returns. Spitzer’s office said union officials did not disclose the arrangement to teachers and “instead took steps to conceal it.”
“A simple rule that my office has enforced time and time again is that fiduciaries must place the interests of their clients first,” said Spitzer, who has gained a national reputation for forcing reforms on Wall Street.
The deal was one of several such arrangements nationwide between unions and investment companies, according to a report in the Los Angeles Times.
Under the agreement with Spitzer, the 525,000-member union will conduct open bidding for future retirement plan endorsements, provide full disclosure of all payments from insurance companies, provide free and impartial investment advice to members and allow them to roll over current savings to a new endorsed plan at no cost.
It will also hire an independent consultant to oversee reforms and report to the attorney general’s office.
“It’s clear now that the trust, despite its best intentions, historically could have _ and should have _ provided greater disclosure of the fees paid the trust by ING,” NYSUT President Richard Iannuzzi said in a statement. “Mistakes were made. They will not be made again.”
The union last month defended its practices, saying that an independent consultant was hired in 2005 to make sure ING was the best, or one of the best, in the field. The union said it decided to hire a consultant rather than seek bids because switching investment companies would have burdened union members with the paperwork needed to transfer their holdings.
Spitzer, a Democratic candidate for governor, had been scheduled in early May to address NYSUT in Rochester, but he canceled because of the investigation. Had Spitzer made the appearance, the union would have issued its endorsement of him at the time, said NYSUT spokesman Dennis Tompkins.
The union will now endorse a candidate in the race for governor in August, when it typically makes endorsements in statewide races.