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.

ELNY Hardship Fund Decisions to be Mailed

While the ELNY liquidation was finalized in August 2013 and cuts to annuitants began immediately, the ELNY Hardship Fund that was voluntarily established by a group of life insurance companies was not prepared to make funds available at that time.  The ELNY Hardship Fund, administered by JAMS,  now reports that its “regulatory review process” is complete and decisions on applications will be mailed the week of March 17, 2014.  Unfortunately, with over $960 million in cuts to annuitants and just $100 million in the Hardship Fund, it is not possible for the Fund to meet the needs of all of the affected annuitants, some of whom saw cuts of up to 69% of their contract value.

NCOIL to Host Debate on Pension De-Risking Model Law

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Edward Stone will participate in a point-counterpoint debate on pension de-risking at  the NCOIL (National Conference of Insurance Legislators) spring meeting held in Savannah, Georgia March 7-9, 2014.  The proposed Pension De-Risking Model Act, sponsored by Rep. George Keiser (ND) would establish protections at the state level for retirees whose pension benefits were transferred from an ERISA protected plan to a substitute pension plan, such as a group annuity contract, provided by an insurance company licensed and regulated under state law.  The proposed Pension De-Risking Model Act requires mandatory disclosures, equal protection from creditors, an opt-out provision, a supplemental guaranty or reinsurance and approval for subsequent transfers.

“The ELNY Saga” at the National Association of Settlement Purchasers 2013 Annual Conference

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Edward Stone was a guest speaker at the National Association of Settlement Purchasers 2013 Annual Conference in Las Vegas in November 2013.  Instead of sweeping the ELNY debacle under the rug,  NASP and the conference participants embraced the opportunity to hear about the history of ELNY’s failed rehabilitation and its impact on both the primary and secondary structured settlement markets.

Model Pension De-risking Act on NCOIL’s Spring Agenda

As more companies seek to reduce their pension obligations by transferring their obligations to insurance companies via annuity buy-outs, regulation of these risk transfers, including disclosures and protections for retirees will be paramount. Retirees often refer to annuity buy-outs as “pension stripping” transactions because the offloading of pension obligations to an insurance company or other annuity provider causes retirees to lose all of the comprehensive and uniform protections intended by Congress under ERISA, including the financial safety net offered by the PBGC.

The Pension De-Risking Model Act, sponsored by Rep. George Keiser (ND), was presented for the first time at NCOIL’s Annual Meeting in November of 2013.  The Pension De-Risking Model Act will be more fully explored at NCOIL’s Spring Meeting scheduled for March 6-9, 2014 in Savannah.  The Pension De-Risking Model Act provides for (1) mandatory disclosures to retirees whose benefits are transferred; (2) creditor protections for retirees;  (3) opt-out options for retirees; and (4) supplemental protections in the form of third-party guarantees or reinsurance.

Edward Stone  presented information on the importance of protecting retirees in pension de-risking transactions at the November NCOIL meeting and can provide assistance to those concerned about the impact of pension de-risking and pension stripping transfers on retirees.

Gone, But Not Forgotten! the Remnants of ELNY

Peter Bickford’s Insight Column in the September 9th issue of the Insurance Advocate is an eloquent post mortem for the Executive Life Insurance Company  of New York, the death of which took a long, arduous twenty-two years and left many injured people to drown in its wake.  While New York seems content to sweep ELNY out of state, out of mind and under the rug forever, the impact of this botched rehabilitation and fundamentally flawed liquidation will simply not go away for the victims, some of whom lost as much as 70% of their “guaranteed” payments after suffering catastrophic injuries or the loss of a loved one. The ELNY debacle is a disgrace for the insurance industry and for the Department of Financial Services, its predecessors and agents, especially the New York Liquidation Bureau.  We can only hope that Mr. Bickford’s call for reform of the insurance insolvency process does not fall on deaf ears.

 

Eddie Stone Talks about Pension Stripping on Labor Lines Radio

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In this radio interview on Long Island’s original labor radio show, Labor Lines, Vic Fusco discusses concerns over pension de-risking, or pension stripping as retirees refer to it, with  New York State Senator Tony Avella and Eddie Stone.   Pension stripping is the latest tool used by corporations to remove pension liabilities from their balance sheet.  The corporation purchases an annuity contract from an insurance company to replace a retiree’s pension.  This has the result of robbing retirees of their protections under ERISA and the safety net offered by the Pension Benefit Guaranty Corporation.   Listen to the radio show here.

NY Senator Tony Avella to Introduce Bill to Combat Pension Stripping

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New York State Senator Tony Avella will introduce legislation in the upcoming session designed to protect retirees whose pensions are sold off without advance notice.  Once known as “pension de-risking” retirees refer to this method of transferring the financial risk of pensions from corporations to retirees as “pension stripping”.  The method of pension stripping that seems to be the corporate favorite converts a pension into a group annuity contract causing retirees to lose the uniform protections intended by Congress under ERISA including the  annual coverage provided by the Pension Benefit Guaranty Corporation.  The proposed legislation is designed to replace the protections for earned benefits that were intended under ERISA with reasonably equivalent  protection at the state level.

ELNY Cuts Went Into Effect August 8, 2013

The Restructuring Agreement approved by the liquidation court last April “closed” on August 8, 2013 and cuts to over 1500 Executive Life annuitants went into effect immediately.  The revised schedule of cuts posted on the GABC website revealed that most annuitants saw increases in their shortfalls of 3-4%.  The final schedule is expected to be published soon.

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.