A class action lawsuit has been filed against LifeUSA Holdings that accuses the company of keeping owners of one of its annuities in the dark about the amount of interest they're making on their investment.

The suit, filed in U.S. District Court in Philadelphia, targets LifeUSA's Accumulator annuity. U.S. District Judge J. Curtis Joyner certified the case as a class action suit on Jan. 19, 2000. LifeUSA, based in Minneapolis, is a subsidiary of Allianz Life Insurance Co. of North America.

The law firm of Elliott Reihner Siedzikowski & Egan of Blue Bell, Pa., is representing more than 280,000 people who have purchased the Accumulator since Aug. 1, 1989. The class consists mostly of senior citizens who have invested an average of $25,000 in the product.

Accumulator is a two-tiered annuity, which provides a higher interest rate in the early years but a lower rate you when you begin annuitizing. The suit claims that quarterly statements mailed to annuity holders before they annuitize (meaning when you start receiving payments) report a false interest rate on the Accumulator annuity. For example, the company will say the interest rate is 5 percent when it is really 4.1 percent, says Mark Kearney, an attorney representing the plaintiffs.

Furthermore, when annuity holders begin receiving monthly payments, the suit alleges LifeUSA never sends another account statement. The suit also claims that LifeUSA applies different interest rates on the annuity depending on when owners begin receiving payments. "The purchaser never knows the real interest rate," Kearney says. "From the time you put money in to the time you annuitize, you never know what you're getting. There's no way you can win."

A spokesperson for the company says the allegations are "totally unfounded," adding that Accumulator annuity holders have not sustained any financial losses. "We have done nothing wrong," says Margery Hughes, president of Allianz. "We will vigorously fight this case and see it to its conclusion in court."

Kearney says the case will likely go to trial by late March 2000.