Hartford Financial Services Group Inc. has settled with both the Connecticut and New York attorneys general over its use of expense kickback agreements with brokers selling certain types of group annuities.

Under the agreement, Hartford will pay $20 million, including more than $16 million to plan sponsors that bought terminal or maturity funding group annuities between Jan. 1, 1998, and Dec. 31, 2004. The two states will split the almost $4 million remaining equally.

The state officials charged Hartford with paying millions of dollars in hidden compensation to four brokers to steer pension plan business to the company.

“The Hartford paid secret kickbacks to brokers who steered pension plan business and undercut the competitive bidding process, raising the pension plan’s costs,” said Connecticut Attorney General Richard Blumenthal in a statement.

In addition to paying normal commissions on sales of these products, Hartford acknowledged it had a hidden expense payment agreement with four producers, Dietrich & Associates Inc., Brentwood Asset Advisors, USI Consulting Group and BCG Terminal Funding.

The practice raised costs for a number of pension plans, including Crown Vantage Inc., Tenet Health System, G.E. Consumer Finance and Kuehne & Nagel, according to Blumenthal.

New York Attorney General Eliot Spitzer said other pension plans hurt by the scheme included Montgomery Ward Co., Benetton Sportsystem USA Inc., PricewaterhouseCoopers and Mt. Sinai Medical Center of Florida.

As part of the settlement, Hartford will accept a three-year ban on paying contingent compensation for terminal or maturity funding group annuities.

The company also apologized to plan sponsors for failing to provide full disclosure of the compensation it paid brokers who sold the group plans.

“Resolving this matter was important for our company,” said Hartford’s chairman and CEO Ramani Ayer. “We have cooperated fully with regulators during their investigations and will continue to do so.”

The two states began their investigation of the marketing of retirement products last year after receiving tips that insurance companies were making secret kickbacks to brokers to recommend certain group annuities to pension plans, according to statements from Spitzer and Blumenthal.

Terminal and maturity funding group annuities allow a plan sponsor to buy a single-premium group annuity to cover all or part of a pension plan’s liabilities.

A terminal funding annuity is used when a company terminates its pension plan, while a maturity funding annuity is used to help satisfy a business’s future obligations to plan participants.

Between 1998 and 2004, the company paid the four producers about $4 million in hidden compensation, according to the settlement agreement.

Hartford says it already eliminated expense reimbursement agreements for producers in its terminal maturity funding group annuity line of business.

As part of the settlement, Hartford also agreed to disclose the disputed compensation practices on its website and to provide plan sponsors information about all compensation paid to producers selling terminal maturity annuities.

It also agreed to support state legislation to abolish contingent compensation for group annuities, increase disclosure of producer compensation, set written standards of conduct and train employees in how compensation is to be paid to producers of terminal maturity funding annuities.

“The company at the center of the scandal has acknowledged misconduct, provided compensation for those who were harmed and implemented reforms that will help protect retirees in the future,” Spitzer said in a statement.

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Connecticut Attorney General Richard Blumenthal, in a statement, said, “The Hartford paid secret kickbacks to brokers who steered pension plan business and undercut the competitive bidding process, raising the pension plan’s costs.”