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.
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.
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.
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 firstname.lastname@example.org or call (203) 504-8425.
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.
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 email@example.com.
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.
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.
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.
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.