The Impact of Deregulation on Pension De-Risking

Check out Edward Stone’s letter to the editor, appearing in the January 25, 2019 online edition of Crain’s New York Business, commenting upon the article “Trump deregulation binge puts state agencies on the spot”.  Following up on Crain’s assertion that the New Jersey Department of Banking and Insurance is over matched when it comes to overseeing “complex financial behemoths like Prudential” Edward Stone points out that: “we may not yet know what happens when an insurer the size of a Prudential or MetLife isn’t policed adequately, we know for sure that the seeds of the next financial meltdown are being sown with deliberate attempts to avoid transparency and accountability at the expense of retirees and their families.”

MetLife Settles with NY over Lost Retirees

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,

Weyerhauser Transfers Obligations for 28,500 Retirees to Athene

On January 23, 2019, Weyerhaeuser  announced that it had entered into an agreement with Athene Annuity and Life Company to purchase a group annuity contract that will transfer Weyerhaeuser’s pension benefit obligations for approximately 28,500 Weyerhaeuser retirees to Athene. This pension de-risking transfer will reduce Weyerhaeuser’s pension plan benefit obligations by approximately $1.5 billion.  In anticipation of this pension de-risking transfer, Weyerhaeuser contributed an additional $300 Million to its pension plan last year.  Click here for our earlier post on Weyerheauser’s pension de-risking plans.

Lockheed Martin – Pension De-Risking

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.

Kentucky Supreme Court Rules on Worker’s Comp Payments

Ruling in a case in mid-December, 2018, the Kentucky Supreme Court held that the Kentucky Structured Settlement Protection Act applied only to “tort claims” and did not apply to workers’ compensation settlement payments. In 2015 Ray Thomas settled a workers’ comp claim against his employer.  The settlement agreement provided for certain lump sum payments to him, and monthly payments for a period of 20 years.  Less than 6 months after settling his claim, Thomas sought to sell his periodic payments to DRB Capital, LLC.  The sale was approved by the circuit court. The insurance company, American General appealed the decision.  The Kentucky Court of Appeals upheld the circuit court’s decision, and American General again appealed.  In Am. Gen. Life Ins. Co. v. DRB Capital, LLC, No. 2017-SC-000329-DG, 2018 Ky. LEXIS 535 (Dec. 13, 2018), Kentucky’s highest court  reversed the decision of the lower court, and found that the settlement agreement, uniform qualified assignment, and annuity policy each contained “clear language prohibiting” assignment of the payments and since they were “the result of a workers’ compensation claim, not a tort claim” the Kentucky Structured Settlement Protection Act did not apply.

Access Funding Fraud in Maryland – Update

Access Funding is back in the news in a January 21, 2019 article in The Washington Post. The recent settlement of a class-action lawsuit brought by two of Access Funding’s former customers would provide about $750,000 for victims of the company.  Under the terms of the settlement, the victims released claims filed by Attorney General Brian Frosh which means that they cannot receive any additional restitution.  Attorney General Frosh’s office has appealed the lawsuit “in the hopes that it will be able to win back money for the victims.”  Access Funding is accused of targeting victims of lead paint poisoning, many of whom are mentally impaired and pressuring them into selling their structured settlement periodic payments.  The Washington Post has actively sought to expose structured settlement scams, in 2015 publishing a feature article by Terrence McCoy, “How companies make millions off lead-poisoned, poor blacks” that highlighted the problems plaguing the structured settlement factoring industry.

Structured Settlement Factoring Companies Sue Each Other

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In late November, 2018 DRB Capital, LLC filed a lawsuit in Palm Beach Circuit Court, Florida against several other secondary market, factoring companies, including Rightway Funding LLC, BTG Advisors LLC, Sempra Finance LLC, Greenwood Funding LLC, and JLC Capital Funding LLC alleging that these companies interfered with DRB’s business in violation of the Florida Deceptive and Unfair Trade Practices Act by employing “a parasitic approach to obtaining customers from which to purchase the transfer of structured settlement rights.” The defendants have filed a motion to dismiss the lawsuit.

PBGC Will Take Over Sears Pension Plans

In a news release on January 18, 2019, the Pension Benefit Guaranty Corporation (PBGC) announced that it would take responsibility for Sears’ pension plans, which cover more than 90,000 people.  A hedge fund run by Eddie Lampert, the former CEO of Sears won a bankruptcy auction with a $5.2 billion proposal to keep the company in business and preserve 45,000 jobs.  The purchase agreement did not include the two pension plans.  Lampert’s offer must still be approved by the U.S. Bankruptcy Court for the Southern District of New York and is being opposed by a committee of Sears’ creditors. It is estimated that Sears’ two pension plans are underfunded by about $1.4 billion.  As a creditor in the Sears bankruptcy, the agency could attempt to recover some of that money through the bankruptcy.

Weyerhaeuser Plans to De-Risk in 2019

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.

NHL Settles Concussion Lawsuit

A four year long lawsuit by 318 former National Hockey League (NHL) players reached a settlement in November 2018. The settlement will reportedly provide the settling players with free neuropsychological tests, up to $75,000 for treatment, and up to $20,000 in cash per player.  A “Common Good Fund” will also be established to assist other players in need. The Washington Post quoted this from the league: “The NHL does not acknowledge any liability for any of Plaintiffs’ claims in these cases,” the league said in a statement. “However, the parties agree that the settlement is a fair and reasonable resolution and that it is in the parties’ respective best interests to receive the benefits of the settlement and to avoid the burden, risk and expense of further litigation.”  Unlike the NFL settlement, this was not a class action settlement.  The lawsuit consisted of just 146 plaintiffs, along with another 172 who retained counsel.  The settlement has a 75 day “opt-in” period, and requires judicial approval.