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2 Teachers Sue
Union
over Retirement Plan
By Kathy M. Kristof,
Los Angeles
Times
July 17, 2007
The National Education Assn. faces a federal lawsuit accusing it of
breaching its duty to members by recommending a high-cost retirement plan
in exchange for millions of dollars from the managers of the plan.
The suit, which seeks class-action status, was filed by two of the 57,000
schoolteachers who the suit says invested $1 billion in a so-called 403(b)
retirement plan endorsed by the NEA.
The suit says the teachers were lured to invest in the plan by assurances
that the NEA "conducted an extensive review of numerous financial
services companies to find the best provider." But the NEA's member
benefit unit "received millions of dollars … as the quid pro quo
for NEA's exclusive endorsement," the filing says.
The money received by the NEA ultimately came from its members' pockets,
according to the suit, through "excessive" fees charged by plan
providers Nationwide Life Insurance Co. and Security Benefit Life
Insurance Co. The fees reduced the returns earned by the teachers who
invested in the plan, the suit claims.
Nationwide and Security Benefit were also named as defendants, as were the
NEA's benefit unit and its directors. All of the defendants declined to
comment on the suit, filed last week in U.S. District Court in
Washington
state, saying they had not received a copy of the filing.
The suit, which liberally quotes from a Los Angeles Times article about
lucrative union endorsements of teacher retirement plans, is unusual in
that it is among the first to contend that a teachers union could be
considered liable for a bad retirement plan under the Employee Retirement
Income Security Act, which governs retirement plans in private industry.
The act requires employers to act in their workers' best interest when
screening retirement plans. School districts have largely escaped those
dictates because the law says that if a district makes retirement plans
available but doesn't encourage membership in any particular one, it does
not have to meet the same duty of care as other plan sponsors.
The suit, however, says the NEA, by endorsing, marketing and selling a
retirement plan, became both sponsor and administrator to the plan's
participants.
The lawsuit asks that the fees paid to the NEA be returned to the
participants. The amount of damages would be determined in court, said
Jeffrey Engerman, a
Los Angeles
attorney who is representing the plaintiffs.
The case was brought by teachers David Hamblen of
Diamond Springs
,
Calif.
, who works for the
El Dorado
Union
High
School District
, and Jerre Daniels-Hall of Port Orchard,
Wash.
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