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.
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.
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.
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.
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.
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.
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.
An updated schedule detailing the benefit cuts for Executive Life Insurance Company of New York (ELNY) annuitants is available on the new GABC website. This updated schedule indicates that most shortfall payees will see additional cuts of approximately 3-4%. If you are an ELNY annuitant whose benefits are being cut, we can perform an analysis of your settlement documents to determine if you have any options for recovery. Please contact us at firstname.lastname@example.org or (203) 504-8425.
The corporate desire to shed pension obligations went into over-drive in 2012 with pension de-risking transactions by Ford, General Motors and Verizon. The pension de-risking trend allowed these corporations to eliminate their obligations to their retirees by billions of dollars. In his column published in the Hanford Sentinel on August 21, 2013 columnist Dennis Beaver answers his reader’s questions about pension de-risking and passes along Eddie Stone’s advice: “For your readers who are covered by a pension and looking forward to a comfortable retirement, I have a warning. Employers across this country have made promises to their employees which will not be honored. Simply stated, pension liabilities dramatically exceed their assets….This is a time when all present employees and retirees need to be aware of what is happening with their pension…”