A company with 10 employees sponsors a profit sharing plan.
An investment advisor convinced the trustee to puchase an annuity with
all the plan assets. The annuity is based on the trustee's age, there are no
provisions for the employees.
The trustee did not understand what he was purchasing. Does he have
any recourse in getting his money refunded? Can anything be done?
Is the trustee liable for any breach of fiduciary conduct?
Full Version: broker fraud
The trustee may have a legal claim based on contract and other business theories against the investment adviser (and annuity provider), but based on my experience, the investment adviser and annuity provider likely have disclaimers--perhaps even signed by the trustee. As for an ERISA claim, the trustee's theory would hinge on being able to snag the investment adviser into the loop of ERISA fiduciaries to the plan, and that the investment adviser breached that duty. Hopefully, no more than 3 years have passed for that one since the trustee knew or had reason to know of the improper investment product. See Browning v Tiger's Eye Benefits Consulting, 4th Cir #06-1404, Feb 26, 2009 (unpublished opinion).
Is the trustee liable? It doesn't sound like he acted very prudently signing up to invest the plan assets into an investment product (i.e., annuity) that he did not understand.
Is the trustee liable? It doesn't sound like he acted very prudently signing up to invest the plan assets into an investment product (i.e., annuity) that he did not understand.
Has it actually been annuitized or is it a deferred annuity that can be redeemed at some later date, and just has to have someone listed as the annuitant? That's not necessarily a problem. I've seen a lot, but it's hard to believe that anyone could be that utterly incompetent to buy an immediate annuity on one life using plan assets.
QUOTE (Bird @ Mar 25 2009, 05:39 PM) 
I've seen a lot, but it's hard to believe that anyone could be that utterly incompetent to buy an immediate annuity on one life using plan assets.
Apparently you have much smarter clients than I do!
I'm wondering about the same things as bird. For 25 years I have seen annuities in small plans because the owner wanted some money in a fixed account. Among my plans there have been no real problems.
PGOLD When you say it is based on the owner's age, are you saying that it is paying a monthly benefit guaranteed for the life of the owner? This would be bad. But if you have an annuity contract that has the owner's name and age on it, that isn't bad at all. There area lots of options to get money out, if some of the 10 employees leave and are entitled to a distribution.
PGOLD When you say it is based on the owner's age, are you saying that it is paying a monthly benefit guaranteed for the life of the owner? This would be bad. But if you have an annuity contract that has the owner's name and age on it, that isn't bad at all. There area lots of options to get money out, if some of the 10 employees leave and are entitled to a distribution.
QUOTE (Jim Chad @ Mar 26 2009, 07:42 AM)
I'm wondering about the same things as bird. For 25 years I have seen annuities in small plans because the owner wanted some money in a fixed account. Among my plans there have been no real problems.
PGOLD When you say it is based on the owner's age, are you saying that it is paying a monthly benefit guaranteed for the life of the owner? This would be bad. But if you have an annuity contract that has the owner's name and age on it, that isn't bad at all. There area lots of options to get money out, if some of the 10 employees leave and are entitled to a distribution.
PGOLD When you say it is based on the owner's age, are you saying that it is paying a monthly benefit guaranteed for the life of the owner? This would be bad. But if you have an annuity contract that has the owner's name and age on it, that isn't bad at all. There area lots of options to get money out, if some of the 10 employees leave and are entitled to a distribution.
I am trying to get more info.
Thanks for your response
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