New York Assemblyman Peter Abbate has sponsored 2019 legislation to protect retirees in pension de-risking transfers.  Assembly Bill A5818 – “AN ACT to amend the insurance law, in relation to providing protection to certain retirees from pension de-risking transactions; and to amend the civil practice law and rules, in relation to statutorily exempt payments” has been referred to the Insurance Committee.  This bill was introduced on February 19, 2019, and is the first step in gaining much needed protections for retirees impacted by pension de-risking transfers.

Pension de-risking through the purchase of a group annuity contract is a concern to retirees because retirees lose all of the uniform protections intended by Congress under ERISA and their rights become subject to non-uniform state laws. Enactment of legislation at the state level is needed to replace these protections.  NY’s proposed legislation, A5818, will provide those protections to New York retirees impacted by pension de-risking transfers.  This legislation will provide basic financial disclosures, protections of annuity benefits from creditors, and reasonable restrictions on subsequent transfers.

Pension de-risking protections have already been enacted in Connecticut and Virginia.  Read more about pension de-risking here and here.

On January 28, 2019, Superintendent of Financial Services for the State of New York, Maria Vullo, announced that the Department of Financial Services (DFS) had settled its dispute with MetLife over the insurers failure to make payments to thousands of retirees owed benefits under pension risk transfer annuity contracts that dated back to 1992.  Under the terms of the consent order, MetLife will pay a penalty of $19.75 Million and restitution in the form of retroactive benefits totaling more than $189 Million.  MetLife was cited for violations from 1992 – 2017 including: (1) improperly released reserves for 13,712 group annuity certificates; (2) failure to adequately search for group annuity certificate  holders;  (3) failure to perform a cross-check against the Social Security master death index; (4) failure to take reasonable efforts to confirm the death of an insured; (5) failure to research and timely commence outreach where variations of an insured’s information existed; (6) failure to ensure that disclosure statements were accurate and complaint with law; and (7) failure to present consumers with an accurate comparison of the fees between existing and proposed variable annuity contracts.  MetLife has been directed to take corrective measures and to retain a third-party servicer specializing in locating beneficiaries who are due pension benefits and have not been paid.  Edward Stone Law reported earlier on MetLife’s settlement with Massachusetts,

Bethesda, Maryland based Lockheed Martin Co., the Pentagon’s top weapons supplier, disclosed its recent pension de-risking transfers in its 8-K SEC filing on January 29, 2019.  In a $1.8 Billion transaction with Prudential Insurance Company, Lockheed transferred pension obligations for approximately 32,000 U.S. retirees and beneficiaries.  In a separate transfer, known as an annuity “buy-in” the Lockheed pension plan has purchased an annuity contract to cover the costs of the pension payments owed to approximately 9,000 retirees.

Late last year Seattle based Weyerhaeuser Co. contributed an additional $300 Million to its pension plan and announced its pension de-risking plans for 2019, which include the purchase of a group annuity contract.  The Weyerhaeuser pension plan has assets of $5.514 billion in the U.S. and Canada, and over 70,000 participants. According to the company’s press release, the combination of lump sum payments and the group annuity contract purchase will reduce the U.S. pension liabilities by approximately 30%, and reduce the number of plan participants by 50%.  The press release did not identify the insurance company that will provide the group annuity contract.

The Pension Benefit Guaranty Corporation (PBGC) will increase it’s fixed rate premium to $80 per plan participant for 2019.  The fixed rate premium was just $35 in 2012.  The PBGC is a federal agency created by ERISA to protect private sector pension plans.  If your pension plan goes belly up, the PBGC wills step in and its insurance program will pay your pension benefits up to certain limits, depending upon your age and when your plan fails or your employer enters bankruptcy.  The PBGC is funded entirely by insurance premiums from the companies its protects, assets from plans for which it serves as trustee, recoveries from former plan sponsors, and its investments.  The PBGC is not funded with tax dollars.