A large financial services company has agreed to pay $20 million to resolve concerns about compensation of group annuity producers.
Hartford Financial Services Group Inc., Hartford, will pay $16.1 million to compensate sponsors of pension plans that bought certain group annuities from Hartford between 1998 and 2004.
Connecticut and New York will split the remaining $3.9 million in settlement funds, Hartford says.
Hartford also has agreed to stop paying contingent compensation to producers selling terminal funding group annuities and maturity funding group annuities for at least 3 years, and it has agreed to do a better job of informing plan sponsors about how it compensates those producers.
Another settlement agreement provision calls for Hartford to support legislation banning use of contingent compensation in the terminal funding and maturity funding group annuity markets.
Hartford will not have to include a charge for the settlement in its second-quarter earnings because it already has established reserves for the settlement costs, the company says.
Terminal funding and maturity funding group annuities are single-premium contracts used in pension plans.
A sponsor buys a terminal funding annuity when it is shutting down a pension plan.
A sponsor buys a maturity funding annuity to fund ongoing pension plan obligations.
From 1998 to 2004, Hartford supplemented the standard commissions for 4 producers selling terminal funding and maturity funding group annuities by paying those producers about $4 million through expense reimbursement arrangements.
“While The Hartford disclosed to plan sponsors the amount of standard commission paid, it did not disclose the additional payments made pursuant to the expense reimbursement agreements,” the company says.
Hartford stopped using the expense reimbursement agreements in 2004, the company says.
Hartford acknowledges in its announcement about the group annuity compensation settlement that it is continuing to work with regulators on other issues.
“Hartford is continuing its efforts to bring other regulatory matters to a conclusion,” the company says.