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“This bill is an important step in the right direction for retirees”

Lawmakers in Connecticut have passed de-risking legislation that has been sent on to Governor Dannel Malloy for signature. Stone is quoted as saying “This bill is an important step in the right direction for retirees.” See “De-Risking Bill Sent to Connecticut Governor; N.Y. Measure Stalled in Insurance Committee”, by Sean Forbes. Reproduced with permission from BNA Pension & Benefits Reporter, 42 BPR 1008 (June 9, 2015). Copyright 2015 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com.

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CT Senate Passes H.B. 6772 – Pension De-Risking

On Wednesday, June 3rd, 2015 the Connecticut Senate unanimously voted to pass H.B. 6772, providing creditor protections to retirees in pension de-risking transactions.  The bill will now be presented to Governor Malloy for signature.  ProtectSeniors.org, a non-profit group advocating for retirees in Connecticut and across the nation led the charge in passing this legislation. As special counsel to ProtectSeniors.org, Edward Stone Law worked with this retiree group in advocating for the passage of this important legislation.

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Stone testifies before ERISA Advisory Council

Edward Stone testified before the U.S. Department of Labor’s Advisory Council on Employee Welfare and Pension Benefit Plans (ERISA Advisory Council) on May 28, 2015.  Stone testified on the need for disclosures to retirees both pre and post pension risk transfers. Recommended disclosures prior to pension risk transfer included:

  • A detailed disclosure statement that contains information regarding the loss of federal ERISA protections, including Pension Benefit Guaranty Corporation (“PBGC”) protection and the applicable state laws that will govern their future annuity payments;
  • The amount, scope and conditions precedent for state guaranty association coverage in the event of an insurance company insolvency;
  • The extent to which annuity payments become subject to creditor claims or avoidance actions by bankruptcy trustees;
  • Disclosure related to any changes that might result in the tax treatment of retiree benefits under an annuity contract;
  • Lump sum options and conditions, if any;
  • Detailed information on the group annuity contract structure, including a schedule of all costs and expenses paid in connection with the transaction;
  • A copy of any fairness opinions or solvency analysis done in connection with the choice of annuity or other benefit provider.

Stone’s recommendation on post transfer disclosures to retirees included requiring all annuity providers, or subsequent benefit providers to provide impacted retirees with at least the following mandatory annual disclosures:

  • Funding levels of all assets relative to expected liabilities under the assumed pension benefit schedules;
  • Investment performance summary by asset class;
  • Investment performance detail by asset class;
  • Expenses associated with any group annuity contract; and
  • Material changes in actuarial assumptions, if any.

 

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Structured Settlement Fraud

Two Edward Stone Law cases were featured prominently in today’s Wall Street Journal – “Firms Help Settlement Holders Cash Out Payments Meant to Last a Lifetime”.  What the WSJ article fails to describe is the high pressure predatory sales tactics used to raid large structured settlement annuities that were intended to last a lifetime.  The Taylor and Lafontant cases highlight just how far the factoring industry has fallen in recent years and how important it is to obtain independent professional advice.  Instead of providing needed liquidity, as advertised, bad actors target large structured settlement annuities and shop for courts and judges they know will rubber stamp petitions that don’t meet the best interest standard required under state and federal law.  If a slick annuity salesperson tries to convince you to fake your relocation to another state with promises of “cash now”, think twice. You could lose your identity (true story) and wind up destitute (truer still).  If you or someone you know has been victimized by structured settlement fraud, Edward Stone Law will evaluate your transaction at no charge, and let you know if help if available.  You can reach us via email at eddie@edwardstonelaw.com or via telephone at (203) 504-8425.

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Once Again, “Don’t Put All Your Eggs in One Basket”

These issues keep coming up again, and again.  Are annuities safe?  Should you lock up all your money in one single annuity? As Dennis Beaver, columnist for the Hanford Sentinel, and a Bakersfield, California attorney told his readers in a recent column “determining if an annuity is right for you requires a careful financial analysis conducted by a fee only financial planner who acts as your fiduciary….”.  Edward Stone is quoted extensively in Beaver’s recent article, offering up the Executive Life Insurance Company of New York liquidation as an example of why you can’t count on guaranty associations to pick up the pieces if your insurance company fails. “While there are State Guarantee Associations which offer some protection. Coverage amounts vary from state to state and range from $100,000 to $500,000 per individual per lifetime. This means that if the doctor put his $800,000 IRA into an annuity, and that company bit the dust, he could face significant disruptions and reductions in his benefit payments.”

It just can’t hurt to say it again.  No company is too big to fail, and contrary to the assertions of some sales people out there, nothing is risk free and annuities are no exception.

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Pension Plan De-Risking Causes Concern for Unions and Retirees with Defined Benefit Plans

Defined benefit plan sponsors have been quietly working to reduce corporate liabilities by moving retirees out of defined benefit plans and into group annuity contracts.  This practice, known to retirees as “pension stripping” takes away the uniform protections intended by Congress under the Employee Retirement Income Security Act (ERISA) and dumps the retirees into the state insurance systems.  Ironically, healthy defined benefit plans are those most likely to be subjected to pension stripping.  Purchasing a group annuity comes at a significant cost to the plan sponsor but has the benefit of permanently removing the liability from the corporation’s books.  In the past few years the industry has seen pension de-risking transfers by Verizon and General Motors that affected over 150,000 retirees. The Verizon transaction was unique in that it did not involve a termination of the defined benefit plan – 41,000 management employees were selectively removed from the defined benefit plan and placed into a group annuity contract with Prudential.

Unions approaching the collective bargaining table should keep the many issues surrounding pension de-risking in mind.  De-risking transfers where defined benefits are replaced with a group annuity contract may create new risks for retirees that need to be addressed at the bargaining table.  A group annuity contract is governed by state law and all of the protections offered under ERISA including financial disclosures, fiduciary standards, uniform protection from creditors and bankruptcy trustees and uniform coverage offered by the federal Pension Benefit Guaranty Corporation (PBGC) no longer exist post transfer.

Legislation is pending in New York that would help replace protections to retirees who are negatively impacted by pension stripping transactions and is expected to be introduced during the next legislative session in Connecticut and a number of other states.  New York’s Senate Bill is S 6150 and was sponsored by Senator Tony Avella of Queens. The bill is currently before the Insurance Committee.  A companion bill was introduced in the New York Assembly by Assemblyman Peter Abbate of Brooklyn. Thus far, the proposed legislation in New York and Connecticut which would bring more uniformity, transparency and accountability into this murky arena have been met with significant opposition from the life insurance industry.

As Special Counsel to ProtectSeniors.org, Edward Stone is assisting the organization in their grass roots campaign advocating for the enactment of state legislation to protect retirees who have been moved out of their ERISA protected defined benefit plans and into group annuity groups.

Edward Stone Law can assist your organization in understanding the risks and benefits involved in pension de-risking transfers.  For more information, email us at eddie@edwardstonelaw.com or call (203) 504-8425.

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Eddie Stone Talks about Pension Stripping on Labor Lines Radio

In this radio interview on Long Island’s original labor radio show, Labor Lines, Vic Fusco discusses concerns over pension de-risking, or pension stripping as retirees refer to it, with  New York State Senator Tony Avella and Eddie Stone.   Pension stripping is the latest tool used by corporations to remove pension liabilities from their balance sheet.  The corporation purchases an annuity contract from an insurance company to replace a retiree’s pension.  This has the result of robbing retirees of their protections under ERISA and the safety net offered by the Pension Benefit Guaranty Corporation.   Listen to the radio show here.

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NY Senator Tony Avella to Introduce Bill to Combat Pension Stripping

New York State Senator Tony Avella will introduce legislation in the upcoming session designed to protect retirees whose pensions are sold off without advance notice.  Once known as “pension de-risking” retirees refer to this method of transferring the financial risk of pensions from corporations to retirees as “pension stripping”.  The method of pension stripping that seems to be the corporate favorite converts a pension into a group annuity contract causing retirees to lose the uniform protections intended by Congress under ERISA including the  annual coverage provided by the Pension Benefit Guaranty Corporation.  The proposed legislation is designed to replace the protections for earned benefits that were intended under ERISA with reasonably equivalent  protection at the state level.

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TOO BIG TO FAIL? WILL THIS MAKE YOUR ANNUITY ANY SAFER?

Recently AIG, GE Capital and Prudential Financial disclosed that they are among the nonbank firms soon to be deemed systemically important financial institutions (SIFI), according to reports in the New York Times and The Economist.  This designation will come with higher capital requirements for these entities and may give consumers the false impression that SIFI’s are backed by some form of government guarantee. If New York’s bungling of the Executive Life Insurance Company of New York (ELNY) rehabilitation and subsquent liquidation is any indication of how insolvency proceedings for SIFI’s would work, it is probably time for the federal government to get involved.  ELNY was almost 100 times smaller than Prudential (the smallest of the big 3)  and its failure painfully highlighted the inadequacies of state regulation of the business of insurance and pushed the voluntary  guaranty associations to the brink.  It’s time to revisit McCarran -Ferguson before it is too late.

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Executive Life – Updated Schedule Available

An updated schedule detailing the benefit cuts for Executive Life Insurance Company of New York (ELNY) annuitants is available on the new GABC website.  This updated schedule indicates that most shortfall payees will see additional cuts of approximately 3-4%.  If you are an ELNY annuitant whose benefits are being cut, we can perform an analysis of your settlement documents to determine if you have any options for recovery. Please contact us at eddie@edwardstonelaw.com or (203) 504-8425.