Company with Houston office settles ERISA pension investigation

On Behalf of | Sep 1, 2012 | Pension, Benefits & Compensation |

Houston residents who have pension plans may or may not know that those plans are governed by the federal Employee Retirement Income Security Act. Also known as ERISA, this group of laws requires employers and plan administrators to act in the best interest of employees when administrating retirement funds.

When employers or administrators violate ERISA laws, they are often liable for any losses employees might incur. For example, last week an investment advisor that has an office here in Houston agreed to pay $1.26 million out to 13 pension plans after the U.S. Department of Labor launched an ERISA investigation regarding fees that may have negatively affected pension-holders.

The U.S. Department of Labor’s investigation involved mutual fund investments that the company was making on the behalf of benefit-plan clients. Company advisors were reportedly receiving what are called “12b-1 fees” out of the funds. These fees are paid out of mutual fund assets in order to cover expenses.

While it is not unusual for pension and other retirement funds to incur fees, the advisors at this company were receiving the fees directly from the fund and not disclosing the fact that this was happening. The advisors did not use the fees for the benefit of its client’s pension plan funds–it could have done so by crediting the fees to the client’s accounts or using the fees to offset fees it charged the clients.

ERISA laws and retirement investment procedures are very complex. To put it most simply, regarding these types of benefit-plan investments, under ERISA laws, investment advisors cannot collect fees or receive compensation from third parties to keep in their own personal accounts.

The U.S. Department of Labor believes the investment advisors had been collecting the fees, but not using them to benefit customer plans, from 2004 to 2010.

Although the company did not admit wrongdoing it has agreed to restore the fee money into the benefit-plans.

Source: Hartford Courant, “Glastonbury-based USI Advisors Pays $1.26 Million To Settle Federal Investigation,” Matthew Sturdevant, Aug. 23, 2012

  • Our firm helps people whose rights to certain benefits are violated under ERISA laws. To learn more about this part of our practice, please visit our Houston Pension Plans page.


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