11 June 2008

A Possible Wrinkle in Teacher Pension Transfer

The Associated Press reports that "A player in West Virginia's 401(k)-style retirement plan for educators may levy an estimated $11 million "surrender charge'' against the state when thousands of plan members transfer into another state-run pension program next month."

"State officials contend the threat comes as VALIC seeks leverage amid allegations blaming its annuities and sales agents for the poor performance of the Teachers' Defined Contribution plan," the article said. "Formerly known as the Variable Annuity Life Insurance Co., VALIC believes its contracts with TDC enrollees allow it to assess penalties if they move too much of their assets out of VALIC-provided annuities."

More than 15,000 TDC accounts will be transferred into the Teachers' Retirement System after July 1. VALIC annuities make up around 30 percent of all TDC accounts, which had a combined market value of $908 million at the end of the last fiscal year.

"I think VALIC sees their ability to level the transfer charges as a bargaining chip going forward,'' Carte Goodwin, general counsel to Gov. Joe Manchin, told AP. "We already know of private lawsuits, but the auditor's office is also looking into possible securities violations dating from the 1990s.''

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