Feds Back 401(k) Plan in Appeal Over AIG Unit Surrender Charge

Variable Annuity Life Insurance Co.'s practice of imposing a surrender charge on 401(k) plans leaving its platform could expose the AIG subsidiary to liability under ERISA, the Labor Department argued in a brief filed with the Fifth Circuit.

The department objects to a Texas federal judge’s 2022 decision holding that VALIC didn’t qualify as a “party in interest” subject to ERISA’s prohibited transaction rules when it negotiated a contract to provide services to a California dental practice’s 401(k) plan. The judge reasoned that a service provider that has no preexisting relationship to a benefits plan can’t be liable for prohibited ...