to the fiduciary duties of ERISA by virtue of its setting the excess interest rates paid under those annuity contracts.
National Western, acting in its fiduciary role, invested the assets of the Plan in its own group annuity policy. The group annuity contracts issued by National Western to the Plan are not invested in a separate account but are invested in the general asset account of National Western. National Western then pays both "guaranteed interest" and "excess interest" on the group annuity contracts issued to the Plan. In its October 1987 opinion, the Court held that this creates a fiduciary responsibility with regard to the amount of interest paid on the Plan's annuity contracts. National Western has not presented any arguments which persuade the Court to change its opinion. The Court acknowledges that the general assets of an insurance company are not necessarily the assets of the Plan. However, by investing the assets of the Plan in its own annuity contracts, while retaining the discretion to determine the interest paid to the Plan, National Western places itself in a position of continued fiduciary responsibility. Courts and the Labor Department in Advisory Opinions have held that the variable part of the policy, and assets attributable thereto, are not considered guaranteed, and should be considered as plan assets subject to fiduciary rules. See, e.g., Pension & Welfare Benefit Programs Re : College Retirement Equities Fund, 78-8 A Op. Dept. of Labor (March 13, 1978); Jacobson, 662 F. Supp. 1103 (D.Conn. 1987). Thus, the Court reaffirms its earlier decision that National Western is a fiduciary for the Plan in regard to interest generated by assets used to purchase National Western group annuity contracts.
The Court's decision is strengthened further by National Western's decision to invest the assets of the plan solely in its own annuity contracts. In doing so, National Western has created an inherent conflict of interest.
National Western has a loyalty to its shareholders to maximize their dividends by diminishing excess interest rates, and a conflicting loyalty to the beneficiaries of the Plan to maximize their benefits by keeping excess interest rates high. If National Western chooses to place itself in this precarious position, it must be willing to accept the consequences resulting from strict scrutiny of its decisions. National Western must be prepared to show members of the Plan that it fully investigated the investment options available, and that after taking into account the average or likely interest payments offered by National Western's annuity contracts and comparing them with other options, that a prudent man would have chosen to invest in the same manner. In addition, National Western must be prepared to show Plan members that the interest paid on the annuity accounts was not out-of-line with the rates of interest paid by similar plans sponsored by similar businesses, and that the amount of interest paid is in the best interests of the Plan.
For the foregoing reasons, defendants' motion for reconsideration is denied. An appropriate Order accompanies this Memorandum Opinion.
Date: November 3, 1989
ORDER - November 6, 1989, Filed
For the reasons set forth in the accompanying Memorandum Opinion, it hereby is
ORDERED, that defendants' motion requesting the Court to reconsider four rulings made in its Memorandum Opinion dated October 30, 1987, is denied.
Date: November 3, 1989