AIG Unit’s 401(k) Surrender Charge Met With Sympathy in 5th Cir.

An attorney challenging an AIG unit’s surrender charge on 401(k) plans leaving its platform faced tough questions from the Fifth Circuit, where judges appeared skeptical that liability could hinge on the company’s ability to waive this charge.

The proposed class action says Variable Annuity Life Insurance Co. penalizes retirement plans that try to take their business elsewhere by charging a 5% surrender fee on assets contributed during the prior five years. The plaintiff 401(k) plan, which allegedly paid more than $20,000 under this policy, says the practice violates the Employee Retirement Income Security Act’s rules prohibiting transactions between plans and ...