Agreement Ends Dispute Regarding Fee Disclosures for Separate Account J
WASHINGTON, Nov. 16 /PRNewswire/ -- Today, ULLICO Inc. announced an agreement resolving a Department of Labor investigation, launched in 2002, regarding technical requirements of the Employee Retirement Income Security Act of 1974 (ERISA).
The Department of Labor (DOL) investigation, which began as an inquiry into ULLICO's pension plan, ultimately focused on whether the compensation arrangements for Separate Account J created under former management satisfied ERISA's disclosure requirements. The DOL did not allege that Union Labor Life collected unreasonable or excessive fees, but complained that even reasonable fees can violate ERISA if they are not adequately disclosed to investors. ULLICO's new management has cooperated fully with the DOL.
"This settlement is about a good faith disagreement over whether legitimate, reasonable and customary fees were sufficiently disclosed. We think they were; the Department disagreed," said President and CEO Mark Singleton. "To resolve this issue, we both agreed to a settlement that involved no finding of any wrongdoing. We cannot stress strongly enough that no investor was overcharged or harmed in any way."
The company has agreed to the settlement to avoid lengthy, expensive litigation, and to eliminate any ambiguity about whether the company's reasonable compensation arrangements were adequately and consistently disclosed under ERISA.
"Today's announcement allows us to move forward by agreeing to disagree, so that we can remain focused on what matters most -- the financial and retirement security of the millions of working men and women across the country," said ULLICO Chairman Joe Hunt. "We are committed to transparency and the strictest standards of regulatory compliance and corporate governance. Today's announcement is consistent with that commitment."
Pursuant to the agreement, the DOL is releasing to all potential claims in exchange for a payment from Union Labor Life in the amount of $20 million and the implementation of a new, simplified fee structure related to Union Labor Life's management of Separate Account J. Union Labor Life has not admitted that any of the compensation arrangements examined by the DOL were unlawful or that the company has acted in any way in violation of law.
The agreement will result in a one-time charge to earnings, but it does not impair ULLICO's ability to continue to grow and better serve its market. ULLICO's risk-adjusted capital and liquidity ratios remain at very high, secure levels.
"Since 2003, we have taken the necessary steps to ensure a strong financial foundation for ULLICO investors, including conducting conservative investment and reserving practices, establishing strong liquidity, and building very high capital levels," said ULLICO President and CEO Mark Singleton. "Today's announcement is a key part of ULLICO's turnaround, and we're anxious to close this investigation and focus on the future."
Most of the $20 million payment -- nearly $16.7 million -- will be distributed to Separate Account J investors. The remainder will go to taxes and required ERISA payments. ULLICO will use a reasonable allocation method to distribute the investors' portion of the settlement, taking into account each investor's investment in Separate Account J since January 1, 1999, the earliest point covered by the DOL investigation.
Union Labor Life created Separate Account J -- or J for Jobs -- 30 years ago to generate risk adjusted returns for its investors, to create jobs for organized workers and to be an additional source of liquidity for real estate developers. J for Jobs invests in high-quality secured mortgages on commercial and residential projects. Because all construction projects are built by unions that were affiliated with the Building and Construction Trade Department of the AFL-CIO as of January 1, 2001, J for Jobs creates jobs for union contractors and union construction workers, whose contributions are essential to the long-term growth of J for Jobs.
J for Jobs charges its investors and borrowers reasonable fees for management of the fund and for administration of its loan program. In return, J for Jobs has regularly beaten its benchmark. As of September 30, 2007, the five and ten year annualized return for J for Jobs has exceeded its benchmark on a net of fee basis. Over the last 30 years, J for Jobs has funded over 382 projects with over $8.6 billion in construction and permanent loans, and created an estimated 400 million man-hours of work which translates into over 200,000 full-time construction jobs.
ULLICO Inc., with $5.3 billion in total assets under management, is an insurance and financial services holding company. ULLICO's subsidiary companies include The Union Labor Life Insurance Company; ULLICO Investment Company; ULLICO Casualty Company and Ulico Insurance Group. The ULLICO Family of Companies offers quality insurance and investment products and services.
|SOURCE ULLICO Inc.|
Copyright©2007 PR Newswire.
All rights reserved