NYSUT Member Benefits Trust agrees to change practices
June 13, 2006

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ALBANY, N.Y. June 13, 2006 - In a settlement announced today between the New York State United Teachers Member Benefits Trust and Attorney General Eliot Spitzer, the Trust has agreed to reform the way it markets and manages 403(b) voluntary investment programs.

The settlement centers on the Trust's endorsement process and disclosure of fees by the Trust for its endorsement of Opportunity Plus, a 403(b) tax-deferred annuity marketed by ING Life Insurance and Annuity Co.

NYSUT President Richard C. Iannuzzi welcomed the attorney general's recommendations, noting they are compatible with changes he had asked the Trust to make prior to the attorney general's review.

"It's clear now that the Trust, despite its best intentions, historically could have - and should have - provided greater disclosure of the fees paid to the Trust by ING. Mistakes were made. They will not be made again," said Iannuzzi, who was elected NYSUT president in April 2005, three days before Spitzer began his investigation.

"The Trust has informed me it has agreed to every recommendation," said Iannuzzi. "This is a positive step forward. The attorney general has given the Trust a road map to reform, and the Trust will follow it."

At Iannuzzi's request, the NYSUT Member Benefits Trust will make changes beyond the attorney general's recommendations, including the appointment of an outside, independent panel to ensure compliance with the terms of the settlement and to review all Trust procedures and policies. Panel members will be named shortly. The Trust is exploring every option to provide the best possible benefits to participants.

The NYSUT Member Benefits Trust is a not-for-profit trust established as a separate legal entity to provide voluntary benefit programs to members. No NYSUT member dues are used to support the Trust, and NYSUT does not profit from the operations of the Trust. The NYSUT Member Benefits Trust has been cooperating with the attorney general's office since the inception of the investigation.

While the investigation focused on the marketing and disclosure practices associated with the 403(b) program, there was no suggestion that any individual in the Trust or in NYSUT personally profited from this or any program.

The Trust has agreed to immediately implement the attorney general's recommendations for reforms in its marketing and endorsement process for the 403(b) program. Those reforms include:

Retaining an independent consultant to oversee changes in the 403(b) program and the process of identifying additional investment options for participants;

Establishing a program to provide union members with free, unbiased professional investment advice at least once every year for so long as the Trust endorses any retirement products;

Enabling ING Opportunity 403(b) program participants to transfer at no cost their Opportunity 403(b) accounts to any new plan the Trust might recommend for consideration by participants;

Disclosing fully any fees the Trust receives for endorsing products or for administrative expenses, a process the Trust put in place before the investigation of the Trust began;

Implementing changes to ensure that any future fees received by the Trust from 403(b) providers are used solely for reimbursement of expenses, not to promote a particular plan;

Training all Trust employees and trustees on issues of product endorsement and potential conflicts of interest; and

Communicating fully these and all future changes to all members and plan participants.
The Trust will also reimburse the attorney general's office the $100,000 cost of the investigation.

"We will bring complete openness and transparency to the Trust's processes," Iannuzzi said. "High standards must be upheld. I am committed to ensuring the NYSUT Member Benefits Trust meets those standards. That is in the best interests of our members."

Approximately 53,000 individuals participate in the ING 403(b) offerings through the Member Benefits Trust. The United Federation of Teachers, United University Professions and Professional Staff Congress do not participate in the Trust-endorsed 403(b) programs; their employers offer different options.

The NYSUT Member Benefits Trust has extended its phone hours from 9 a.m. through 8 p.m. Monday through Friday to respond to questions from Opportunity Plus participants at 1-800-626-8101. A link to the complete agreement between the attorney general's office and NYSUT Member Benefits Trust will be available online at www.nysut.org.

NYSUT, the largest union in New York state, represents more than 535,000 classroom teachers and other school employees; academic and professional faculty at the state's community colleges, State University of New York and City University of New York; and other education and health professionals. NYSUT is affiliated with the American Federation of Teachers, AFL-CIO.

Letter to members from NYSUT President Richard Iannuzzi
June 13, 2006

Dear NYSUT Member,

I am writing to share the results of Attorney General Eliot Spitzer's investigation of the NYSUT Member Benefits Trust's relationship with ING, a vendor endorsed by the Trust to offer voluntary 403(b) investment programs.

In April 2005, three days after my election as NYSUT president, the NYSUT Member Benefits Trust was contacted by the attorney general's office as part of a wide-ranging investigation of the insurance and annuities industries. The Member Benefits Trust, a not-for-profit trust established as a separate legal entity in 1983 to endorse and monitor benefit programs offered to NYSUT members, has cooperated fully and completely with the investigation, which has focused on the process for endorsing 403(b) programs.

In a settlement reached with the attorney general's office, the Trust has agreed to immediately implement all the recommendations for reforms in marketing and endorsement processes for the 403(b) program. Indeed, even before the attorney general's office began its review, the Trust at my request initiated changes that are in sync with the reforms agreed to in the settlement. Those agreed-to reforms include:

Retaining an independent consultant to oversee changes in the 403(b) program and the process of identifying additional investment options for participants;
Establishing a program to provide union members with free, unbiased professional investment advice at least once every year for so long as the Trust endorses any retirement products;
Enabling ING Opportunity 403(b) program participants to transfer at no cost their Opportunity 403(b) accounts to any new plan the Trust might recommend for consideration by participants;
Disclosing fully any fees the Trust receives for endorsing products or for administrative expenses, a process the Trust put in place before the investigation of the Trust began;
Implementing changes to ensure that any future fees received by the Trust from 403(b) providers are used solely for reimbursement of expenses, not to promote a particular plan;
Training all Trust employees and trustees on issues of product endorsement and potential conflicts of interest; and
Communicating fully these and all future changes to members and plan participants.
The Trust also will reimburse the attorney general's office for the $100,000 cost of the investigation.

It is clear now the Trust, despite its best intentions, could have - and should have - historically provided greater disclosure of the fees paid to the Trust by ING and more regularly reviewed investment options. Mistakes were made. They will not be made again. Beyond the reforms outlined in the settlement, I have asked the Trustees, and they have agreed, to establish an independent panel to review all the Trust's policies and procedures and to ensure compliance with all reforms.

Let me state clearly that no NYSUT dues are used for the operation of the Trust; nor does NYSUT profit from the Trust's operation. While the attorney general faults the marketing and disclosure practices associated with the 403(b) program, I want to stress that there has never been any suggestion that any individual in the Trust or in NYSUT personally profited from this or any program.

The Member Benefits Trust has extended its office hours to answer any questions you may have. You may reach the Trust at (800) 626-8101 from 9 a.m. through 8 p.m. Monday through Friday. The Trust is arranging to implement the program that will provide members with free, unbiased professional investment advice. Information on how to access this program will be available through the Trust's 800 number above. Additional information on the agreement will appear in the next issue of New York Teacher, and is also available at our Web site.

As your president, I welcome your questions and concerns, which can be directed to me personally at a dedicated e-mail address: iannuzzi@nysutmail.org. I assure you that my paramount concern is the well-being of NYSUT members. I am confident that the steps being taken today, along with changes already in place, will result in a more open and transparent Member Benefits Trust. As for New York State United Teachers, your union remains strong, financially stable, and committed to the highest standards of integrity and service to our members.

In Solidarity,

Richard Iannuzzi
President, New York State United Teachers

Communication to NYSUT members from Member Benefits Trust Chairperson

Dear NYSUT Member,

As you may be aware, New York State United Teachers Member Benefits Trust (the "Trust") recently reached a settlement with the Office of the New York State Attorney General ("OAG") relating to the Opportunity Plus retirement plan, which the Trust has endorsed since 1989. I am writing to inform you about certain steps that the Trust has agreed to take, as part of the settlement, in order to ensure that the Trust only endorses the best available retirement products.

The Trust has agreed to hire an Independent Consultant - someone who is completely objective - to consider whether it makes sense for the Trust to continue to endorse any retirement products. In the event that the Consultant concludes that such endorsements are in the best interest of NYSUT members, the Trust will conduct an open Request for Proposal ("RFP") process to identify at least three plans for endorsement, including one low-cost plan. The Independent Consultant will oversee the RFP process to make sure that it is fair, and will also review the Trust's policies, procedures and training relating to endorsement of products and conflicts of interest. The Independent Consultant will issue a public report summarizing the review of the RFP process as well as the review of compliance matters.

In the event the Trust endorses any new retirement products, you will receive another letter informing you of the newly endorsed plans. Union members who have invested in the Opportunity products will be offered the opportunity to shift their assets into the new plans at no cost.

Finally, the Trust has agreed to implement a program to provide all NYSUT members with free and objective investment and retirement planning advice. The Trust will provide details on how to receive the advice.

If you have any questions about the settlement with the New York Attorney General or the Opportunity Plus plan, please contact Betsy Porter at (800) 626-8101, ext. 1247, or Derek Clement at (800) 626-8101, ext. 1251.

Sincerely,

Ivan Tiger
Chairperson
NYSUT Member Benefits Trust

NYSUT'S MEMBERS BENEFITS UNIT SETTLES PROBE

Settlement is Part of Ongoing Investigation of Retirement Products

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Attorney General Eliot Spitzer today announced an agreement to resolve an investigation of the marketing of retirement products to members of the state's largest teachers' union.

Under the agreement, an arm of the New York State United Teachers (NYSUT) will adopt a series of reforms and pay $100,000 to the state to cover costs of the investigation.

The agreement follows a lengthy probe revealing that NYSUT's Member Benefits unit accepted payments from an insurance company to promote the company's retirement products to NYSUT members. The unit did not disclose this arrangement and, instead, took steps to conceal it.

"A simple rule that my office has enforced time and time again is that fiduciaries must place the interests of their clients first," Spitzer said. "Accordingly, an office set up to counsel union members on retirement alternatives should always provide objective advice and full disclosure of relevant facts. That did not happen in this instance. But as result of this agreement, reforms have been adopted to ensure that this standard will be met in the future."

The investigation revealed that a retirement product endorsed by the unit - a so-called 403(b) plan offered by the Dutch insurance giant ING and its predecessor, Aetna Life Insurance and Annuity Company charged investors fees and expenses as high as 2.85 percent per year while delivering only limited benefits. The unit endorsed the plan (even though cheaper alternatives were available) in return for undisclosed payments of as much as $3 million per year.

The unit took pains to hide this "silent partnership" with ING/Aetna. The unit would urge union members to attend financial planning seminars, claiming that: "There's no sales pitch - they([the seminars) do not promote specific products or services." But contrary to this claim, the seminars were used as a "foot in the door" to promote ING/Aetna retirement products.

In addition, the unit redirected calls it received arising from the retirement seminars to ING/Aetna employees, who answered the phones with their first names only. Callers thought they were talking to NYSUT benefits unit personnel when in fact they were talking to the insurance company's marketing representatives.

In late 2004, after it became aware of the Attorney General's investigation of insurance and retirement products, the unit drafted a new disclosure policy, which was described by officials in an internal e-mail as moving from a "try to hid(e) it" approach to a more open approach that included disclosing all payments from ING.

Under today's agreement, the unit agrees to the following:

Conduct open bidding for future retirement plan endorsements;
Provide full disclosure of any and all payments from insurance companies;
Allow members an opportunity to roll over savings to a new endorsed plan at no cost;
Provide free and objective investment advice to members; and
Hire an independent consultant to oversee reforms and report to the Attorney General's office.
More than 50,000 New York teachers and other school district employees bought into the retirement plan without having been told by the unit of the payments it received from ING/Aetna.

The investigation underlying today's settlement was conducted by Assistant Attorneys General Peter Dean and Harriet Rosen, under the direction of David D. Brown IV, Chief of the Attorney General's Investment Protection Bureau.

A broad investigation of the marketing of retirement products continues.

Attachments:

NYSUT AOD
Exhibits

NYSUT, NEA/NY merge
May 11, 2006 4:13 PM

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Delegates at the NYSUT Representative Assembly in Rochester May 5 voted unanimously to unite with the National Education Association in New York State. It was the culmination of years of negotiations between the two organizations. The NEA/NY Delegate Assembly had approved the move on April 29.

The merger, which takes effect Sept. 1, involves 525,000 NYSUT members and 35,000 NEA members.

New York State NEA President Robin Rapaport will become NYSUT's 3rd vice president.

Unification talks between the two education unions started in the mid-1970s. It was an important priority for former UFT and AFT President Sandra Feldman and former NYSUT President Tom Hobart, who was present in Rochester for the historic vote.

"Unification means solidarity," NYSUT President Dick Innauzzi told cheering delegates at the Representative Assembly. He said the combined organization would provide "the strength we need to meet the challenges we face."

UFT President Randi Weingarten said "the merger is a recognition that today's national anti-teacher and anti-union climate requires the NEA and the AFT, at least in this state, to put their differences aside and speak with one voice."

New York is the fourth state, after Florida, Minnesota and Montana, in which the two education unions have merged. There have also been some citywide mergers. Across the nation, about 750,000 NEA and AFT members are now in unified organizations. But the two national organizations, after coming close several years ago, failed to conclude a merger.

Full details about the unification of NYSUT and NEA/NY will appear in the May 25 issue of the state edition.