A life insurer has agreed to pay nearly $17 million back to benefit plans that invested in a pooled separate account holding plan.

Union Labor Life Insurance Company, Washington, has agreed to repay fees and compensation to benefit plans that invested in the plan, Separate Account J, according to officials at the U.S. Department of Labor.

The settlement still must be approved by federal district court in Washington.

Separate Account J invests in mortgages secured by real estate projects built by union labor. The sole investors are employee benefit plans, the Labor Department says.

The Labor Department filed a suit alleging that ULLICO failed to get approval from independent plan fiduciaries for moves to take funds directly from the investment account. The department also found fault with the way ULLICO handled loan commitment fees, construction administration fees, lender inspection fees and other payments received from borrowers.

The Labor Department also says ULLICO violated ERISA by using its authority over the separate account to set its own compensation levels.

ULLICO kept millions of dollars from loan applicants that failed to go forward with loans, even though the benefit plans assumed virtually all the risk of funding those loans, Labor Department officials allege.

In addition to reimbursing the benefit plans, ULLICO must pay $3.3 million to an escrow account to cover other civil penalties and excise taxes resulting from alleged violations of the Employee Retirement Income Security Act, officials say.

The settlement also permanently bars ULLICO from retaining compensation from any source with Separate Account J without disclosing the compensation and getting approval from suitable independent plan fiduciaries. Another provision of the settlement prohibits ULLICO from exercising any unilateral authority over the compensation it receives as a fiduciary or provider for ERISA-covered benefit plans, officials say.