Life Insurance Company Commissions and Fees
Beginning in about 2012, and now in 2016 more than ever, the life insurance industry is taking over the administration of most retirement plans, such as IRAs, 401(k), 403(b), 457, etc.
The fees that they charge to the Participants (and Alternate Payee) are very high. This includes the typical regular quarterly fees, QDRO fees, and they are putting many retirement plan Participants into annuities. The annuities generate very high commisions that are paid by the Participant.
One result is that they stall the QDRO process as long as possible in order to collect the next quarterly fee. They stall because they assume that the Alternate Payee will remove his or her money from the new QDRO account ASAP, and then the life insurance company will lose its fees on that money (which is probably true.)
One novel new stall tactic is to use a 30 day to 60 day "rescission" period after it receives the Judge-approved QDRO. Even though both spouses and the Judge have signed the QDRO and it is now a court order, the insurance companies think the spouses have another 30 to 60 days to object. The truth is, there is no objection period.
AXA and TIAA-CREF are two of the life insurance companies that are routinely putting 403(b) Participants (specifically Colorado teachers and other Colorado government employees) into annuities. Annuities have very high commissions and fees. They also have early distribution penalties that are very unfair. Annuities are not investment products. They benefit the life insurance company, not the retirement plan owner.
QDRO Processing and Review Fees
Particularly in 2015-2016, QDRO processing fees charged by life insurance companies (and others such as Wells Fargo) are sharply increasing. Some are still at $250 to $300, but others are charging $500 to $750 (or more) for each QDRO.
One example is a local insurance company which has been charging $250. In 2015 they changed their name and increased their QDRO processing fee to $725.
Another example is the Principal Life Insurance Company. In July 2016 I received notice that they are charging an amazing $889. They claim to have spent 2.45 hours at a fee of $220/hour "reviewing" the QDRO after both spouses had signed it and the Judge had made it a court Order. Their "review" did not result in any request for changes. This is in addition to their $350 QDRO processing fee. That Principal letter is attached as a PDF file.
They have been getting away with the very high fees because the employers who hire them are not affected. It is the employees who are paying the big money.
|