Virginia is the latest state to enact legislation protecting retirees in pension derisking transfers.  Senate Bill SB755 introduced by Senator Glen Sturtevant (R-Midlothian) with support from Delegate Dawn Adams (D-Richmond) received unanimous support in both the Virginia House and Senate.  Virginia law now provides that (1) amounts payable to a participant under an annuity providing retirement benefits are exempt from creditors’ claims, and (2) subsequent transfers of group annuity contracts funding retirement benefits are prohibited without the prior written approval of the State Corporation Commission.  Amending Section 38.2-3125 of the Virginia Code, this new legislation went into effect on July 1, 2018. The complete text of SB755 is available here: SB755.

Prudential Financial Inc. has reported that it has lost track of some of its annuity clients.  This announcement comes on the heels of MetLife’s announcement in December, 2017 that it had lost track of about 30,000 people to whom it owed pension payments as a result of pension de-risking transfers.  According to BloombergMarkets, Prudential will also take a charge tied to losing track of its customers.

If you are a retiree who believes you are missing payments from Prudential, please contact us at eddie@edwardstonelaw.com or (203) 504-8425.

 

 

In a recent interview with PlanSponsor, Jack Cohen, Chairman of the Association of BellTel Retirees, spoke out about the need for protections for retirees in pension de-risking transfers.  “It’s really an unfortunate picture, but we also have to be realistic and keep working hard,” Cohen concludes. “I know that de-risking is a phenomenon whose time has come. But this does not mean we should stop asking questions and stop working to make risk transfers the best we can for retirees. We have to wonder if the insurance companies can stand to take all that risk, and how they will manage it. What we are concerned with is trying to recoup at least some of the protections that we had under ERISA. We are not looking for pie in the sky—we’re looking for Congress and the state legislatures to recognize this could become an economic disaster if we do not protect peoples’ pensions.”

In 2012, 41,000 Verizon retirees were removed from the Verizon pension plan when Verizon purchased a group annuity contract from Prudential to replace the pension benefits for these retirees.  A subsequent legal challenge to the transfer by the Association of BellTel Retirees was ultimately unsuccessful, but the challenge brought much needed attention to the risks facing retirees in pension de-risking transfers.  In late 2015, Connecticut became the first state to pass legislation protecting retirees in pension de-risking transfers. Bills are now pending in New York, Pennsylvania, and Virginia which would replace some of the protections lost to retirees who reside in those states.

 

In early October, 2017 International Paper continued its pension de-risking, transferring approximately $1.3 Billion in pension liabilities to Prudential Insurance Company of America through the purchase of a group annuity contract.  This purchase impacted 45,000 retirees and beneficiaries.  This followed on the heels of an offering of a lump sum buyout in 2016 to 47,000 former employees who had yet to retire.  The Consumer Finance Protection Board has published a guide to help those considering accepting a lump-sum payout.

With interest rates low and the corporate desire to reduce liabilities high, pension de-risking transfers continue at a rapid pace.  While Verizon was one of the first, since 2012 many companies including GM, J.C. Penney, United Technologies, PPG Industries and Lincoln Electric have de-risked by transferring their pension liabilities to an insurance company.  These pension de-risking transfers have impacted hundreds of thousands of retirees nationwide.

Since retirees in de-risking transactions lose all of the uniform protections intended by Congress under ERISA, including the PBGC back-stop, the enactment of legislation at the state level to replace what was lost is essential.

In 2015, Connecticut became the first state to pass legislation protecting retirees in pension de-risking transfers by restoring creditor protections to retirees whose pensions were replaced by group annuities issued by insurance companies. In 2016, legislation that would have provided additional critical protections stalled despite an insurance committee vote of 17-2 in favor of this legislation. In January of 2017, ProtectSeniors.org headed back to the drawing board and worked with Senator Carlo Leone to introduce a new bill.  Senator Leone introduced Proposed Bill 493 and a public hearing was held on February 16^th. The Joint Committee on Insurance and Real Estate voted 16-5 in favor of Proposed Bill 493.  On March 10, 2017 the bill was filed with the Legislative Commissioner’s Office – the next stop will be the Senate floor.

In New York, legislation introduced in 2015/2016 stalled in New York’s politically charged insurance committee. Dedicated members of ProtectSeniors.org are working to move things along in New York.

In Massachusetts, House Bill 476, introduced by Representative James Arciero would provide creditor protections, limitations of subsequent transfers, and financial disclosures to retirees impacted by pension de-risking transfers. The bill has been referred to the Joint Committee on Financial Services.  

And finally, in Pennsylvania, House Bill 324 providing creditor protections to retirees was introduced by Representative Warren Kampf.  This bill was referred to the Judiciary Committee on February 3, 2017.

A version of this post appeared in the ProtectSeniors.org recent newsletter.