AIG Subsidiary Defends 401(k) Surrender Charge in Fifth Circuit

Variable Annuity Life Insurance Co.'s practice of imposing a surrender charge on 401(k) plans leaving its platform isn’t a fiduciary act that could expose it to liability under ERISA, the AIG subsidiary told the Fifth Circuit.

The “overwhelming weight of authority” holds that retirement plan service providers don’t act as fiduciaries under the Employee Retirement Income Security Act when they negotiate and accept a “predetermined contractual fee,” VALIC said in a brief filed Wednesday. The surrender fee at issue was calculated using a formula that the plan fiduciary agreed to, and VALIC’s “theoretical right” to waive this fee doesn’t transform ...