Pacific Life Insurance Company faces a class-action suit contending that the company improperly sold variable annuities for use within individual retirement accounts.[@@]
Pacific Life, Newport Beach, Calif., has denied any wrongdoing.
“Pacific Life strongly disagrees with the claims in the lawsuit, and we are vigorously defending ourselves,” the company says.
Lawyers from Milberg Weiss Bershad & Schulman L.L.P., New York, have filed the case, Cooper vs. Pacific Life, in a U.S. District Court in Georgia.
A federal judge in that state earlier has certified a class, and Milberg Weiss says it soon will begin notifying 120,000 purchasers of variable annuities that they may qualify to participate in the class.
To qualify, a customer must have purchased a variable annuity for use within a qualified plan between Aug. 19, 1998, and April 30, 2002.
The plaintiffs in the suit claim that Pacific Life sold variable annuities to customers who were rolling cash into IRAs, from 401(k) plan accounts, without telling the customers that the deferral of taxes available with a variable annuity had no value for an investment in an IRA. IRA investments automatically qualify for deferral of income taxes.
Pacific Life distributed a VA client guide, but only beginning in 2002, 2 years after the class-action period began, according to the plaintiffs.
Variable annuity industry representatives note that variable annuities may be of interest even to investors with assets in retirement accounts that qualify for deferral of income taxes.
Variable annuity contracts offer death benefits and retirement income guarantees as well as tax advantages, according to Scott Logan, former chairman of the National Association for Variable Annuities, Reston, Va.