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

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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.

Stone testifies before ERISA Advisory Council

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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.

 

Structured Settlement Fraud

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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.

Stone to Speak at Society of Settlement Planners Annual Conference

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Edward Stone will be a guest speaker at the Society of Settlement Planners 2015 Annual Conference in Las Vegas on March 30, 2015. Mr. Stone’s presentation will focus on the risks to settlement planners in the aftermath of the Executive Life Insurance Company of New York (ELNY) failed rehabilitation and eventual liquidation.

Tough Times for Structured Settlements

The structured settlement business is shrinking as falling demand makes them less attractive to claims professionals.  But a potentially bigger issue for the industry involves ongoing litigation involving Executive Life of New York (ELNY). In a new article for LifeHealthPro, attorney Edward Stone highlights the impact this litigation has for both a major structured settlement company and Casualty insurers who use structures to resolve cases. As Stone writes, this litigation “threatens one of the product’s perceived key advantages for claims departments: namely, the belief that use of a structured settlement to resolve a claim does not entail additional risk.”  Read the full LifeHealthPro article here.

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

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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.

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

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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.

ProtectSeniors.Org is Leading Grass Roots Campaign Supporting Protections for Retirees in Pension Stripping Transfers

ProtectSeniors.Org is leading a grass roots campaign advocating for the enactment of state legislation to protect retirees who have been moved out of their ERISA protected defined benefit pension plans and into group annuity contracts.  As Special Counsel to ProtectSeniors.Org, Edward Stone Law has assisted the organization in their efforts to educate their membership on this important issue.  Retirees looking to actively participate in the ProtectSeniors.Org campaign can find more information at their website at www.protectseniors.org.

Stone Speaks at Society of Settlement Planners 2014 Annual Conference

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Edward Stone spoke at the Society of Settlement Planners, 2014 Annual Conference in New Orleans on April 28th.  Mr. Stone’s presentation, “ELNY – Lessons Learned and the Impact Going Forward” was well received by those attending the conference.  For those settlement planners present who were not active in the industry over 20 years ago when the ELNY debacle first began, Mr. Stone condensed those years into a few power point slides and then expanded upon the lessons settlement planners and all participants in the structured settlement industry should learn from the ELNY debacle, and most importantly, what measures can be taken to ensure that it doesn’t happen again.  The presentation was followed by a lively question and answer session that spilled over into the cocktail hour that followed  and beyond! Further questions regarding the presentation are welcomed – please contact us at (203) 504-8425 or via email at eddie@edwardstonelaw.com.

 

Pension De-Risking Debated at NCOIL Meeting

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On behalf of ProtectSeniors.org, a retiree advocacy group, Edward Stone debated the issue of pension de-risking at the Spring 2014 National Conference of Insurance Legislators (NCOIL) meeting in Savannah, Georgia on March 9th with Prudential Insurance’s pension expert, Dylan Tyson.  Moderated by Rep. George Keiser (ND), former NCOIL President, the debate addressed questions such as what is pension de-risking; what affect does it have on retirees; and how do state and federal protections measure up? For details on the debate, see the April, 2014 issue of the Seniors Advocate, a newsletter published by ProtectSeniors.org.