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

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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.

Executive Life – Updated Schedule Available

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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.

 

Where is Your Pension?

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The corporate desire to shed pension obligations went into over-drive in 2012 with pension de-risking transactions by Ford, General Motors and Verizon.  The pension de-risking trend allowed these corporations to eliminate their obligations to their retirees by billions of dollars.  In his column published in the Hanford Sentinel on August 21, 2013 columnist Dennis Beaver answers his reader’s questions about pension de-risking and passes along Eddie Stone’s advice:   “For your readers who are covered by a pension and looking forward to a comfortable retirement, I have a warning. Employers across this country have made promises to their employees which will not be honored. Simply stated, pension liabilities dramatically exceed their assets….This is a time when all present employees and retirees need to be aware of what is happening with their pension…”

ABC6/Philadelphia’s Nydia Han Talks About ELNY Annuities

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ABC6/Philadelphia’s Nydia Han’s piece entitled “Cautionary Tale About Annuities” aired in the Philadelphia area last night.  Han’s piece emphasized the risks associated with annuities and cautioned consumers about “putting all their eggs in one basket”.  One Executive Life (ELNY) annuitant was featured in this segment, whose benefits will be cut by 54% sometime in the next month under the liquidation plan approved by New York last year.  The Executive Life (ELNY) failure is particularly disturbing because the company’s assets had been managed by the State of New York for more than 21 years.

Annuity Industry curtails Benefits

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In an excellent article in Life HealthPro on July 25, 2013 entitled “Another blight on the bruised annuity industry’s reputation – When will the industry clearly explain itself to the public?” life insurance news editor Michael Stanley analogizes the annuity industry’s recent attempts to renege on the generous income and death benefits they promised to the restaurant that hawks free appetizers to bring in more customers and then fails to deliver.  Unfortunately for the Executive Life (ELNY) victims who face looming benefit reductions, there is a great deal more to be lost than some fried calamari.  Insurers lurk in the shadows, in D.C. and the state legislatures across the country, spending lavishly to protect themselves from real regulation by hiding behind McCarran Ferguson, gutting the federal insurance oversight office and fighting the “too big to fail” designations so that they don’t have to expain things like wholly owned captive insurance companies and affiliated transactions.  Michael Stanley is right when he says “Americans love repentence, we laud a good public apology”.  Instead of Executive Life of New York (ELNY) standing out as a black mark on the insurance industry, it could have been one of those shining moments where the life insurance industry came togther and did the right thing for those who matter – the policyholders.

HOW TO PICK A RELIABLE ANNUITY

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Edward Stone is quoted in this article by Gail Liberman and Alan Lavine that appeared in the Wall Street Journal’s Market Watch on May 17, 2103.  ”  The article points out that benefit payouts on annuities are guaranteed by state insurance guaranty associations where the coverage limits vary by state from a low of $100,000 to a high of $500,000 and that settling a claim when an insurance company fails can take many years.  Edward Stone suggests choosing your annuity extra carefully and “cross out insurance companies that have significant exposure to wholly owned captive insurance companies”.

Class Action Suit in pension de-risking transfer

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A federal court in Dallas, Texas has certified a class action on behalf of Verizon pension beneficiaries, permitting 41,000 retirees to sue as a group over the transfer of their pension benefits to Prudential Insurance Company of America.