Mutual of Omaha sued for excessive fees in stable value fund

Posted on: June 15th, 2017 by Steve Larson

A participant has filed suit claiming that a stable value fund provider “improperly exercised its discretionary authority to maximize its own compensation and retain large profits rather than crediting the participants and beneficiaries of the plans with appropriate returns.”

The suit, Insinga v. United of Omaha Life Ins. Co., D. Neb., No. 8:17-cv-00179, brought by Philip Insinga, a participant in the Safe Auto Insurance Company 401(k) Plan, is seeking class action status on behalf of all participants in and beneficiaries of defined contribution plans within the meaning of ERISA § 3(2)(A), 29 U.S.C. § 1002(2)(A), who had funds invested in the United of Omaha Guaranteed Account from May 26, 2011 to the conclusion of this action.

The suit states that discovery will show that during the relevant time period, “United of Omaha made and retained millions of dollars annually from ERISA defined contribution retirement plans’ investments in the Guaranteed Account, and the amounts credited to the plans were consistently dwarfed by United of Omaha’s investment returns.” Said another way, that “United of Omaha retained excessive compensation at the expense of plan participants,” and that, “as a result of United of Omaha’s actions, the plans’ assets were diminished.”

The suit notes that plan documents and fee disclosure materials provided to Plaintiff fail to disclose that United of Omaha can and does retain the difference between the credited interest rate it chooses to give retirement plans and its actual investment earnings on the funds it invests on behalf of the plans. Moreover, that the Contract “…promises only preservation of principal and an unspecified rate of return, minus fees,” and that the investment risk is borne by the participants “because United of Omaha can change the credited interest rate in its sole discretion, restrict participants’ and plans’ ability to cease investing in the Guaranteed Account (by using, for example, the equity wash and market value charge), and close the product if market conditions are not favorable to United of Omaha.”