California teachers settle class-action lawsuit over in-plan annuity fees

Three weeks after a federal judge certified a class of California public-school employees in a lawsuit over in-plan annuity fees, the plaintiffs settled with the insurance company.

Plaintiff Danielle Krimbow claimed that the Life Insurance Company of the Southwest improperly charged certain annuity rider fees that were not disclosed on the state's required retirement investment website.

In a July 15 decision, U.S. District Judge P. Casey Pitts of the Northern District of California certified the class. On Wednesday, Pitts signed a joint notice of settlement and stayed the case.

Both parties “anticipate preparing a formal settlement agreement and submitting a motion for preliminary approval of the agreement by October 2, 2026,” the motion states.

Krimbow represented thousands of California educators and other public employees who purchased Guaranteed Life Income Riders on LICS's indexed 403(b) annuity products and allegedly paid fees that differed from those disclosed on the state-sponsored website, 403bCompare.com.

Unfair competition alleged

The lawsuit alleged that the insurer violated California's Unfair Competition Law by charging fees that were not properly disclosed as required under the California Education Code.

The lawsuit dates to 2023, with educators claiming the cost of the annuities ate into their 403(b) retirement plans. Life Insurance Company of the Southwest denied all claims and filed a motion to dismiss. In July 2024, Pitts granted a partial summary judgment, allowing Krimbow alone to proceed with her claim.

The initial lawsuit describes robust sales of financial products marketed to California’s more than 300,000 public school teachers. Federal law permits public schools and non-profits to offer employees tax-advantaged employer-sponsored retirement plans known as 403(b) plans. For many years, vendors did not have to fully disclose the fees associated with plan options, the lawsuit states.

In 2002, the California Legislature passed a bill that included the creation of the website 403bcompare.com. The impartial website provides full product and fee information to help employees decide.

According to court documents, LICS increased the annual fee for the Guaranteed Life Income Rider from 0.75% to 0.80% in 2016 and then to 0.90% in 2019. Although the higher rates were disclosed in customers' contracts, the insurer allegedly failed to update the fee listed on 403bCompare.com, which continued to display the original 0.75% rate.

Krimbow, a California public-school teacher, purchased a SecurePlus Platinum indexed annuity in September 2019 and elected the GLIR. She paid the 0.90% fee disclosed in her contract while the state website still listed the rider at 0.75%, according to the court.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.