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.

MetLife Settles with Massachusetts Over Unpaid Pensions

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In late 2017, MetLife announced that it had lost track of some retirees.  MetLife had assumed the responsibility of paying these retirees in a pension risk transfers done years ago, and disclosed that it followed a policy of trying to reach beneficiaries just twice. Once when they approached age 65, and again 5 1/2 years later when federal law required them to begin taking benefits.  MetLife was charged with fraud in June 2018 by the Commonwealth of Massachusetts. The lawsuit was settled in late December with MetLife paying a $1 Million fine to Massachusetts.  MetLife is making payment to the formerly “lost” annuitants with interest.

PBGC Premiums Will Increase in 2019

The Pension Benefit Guaranty Corporation (PBGC) will increase it’s fixed rate premium to $80 per plan participant for 2019.  The fixed rate premium was just $35 in 2012.  The PBGC is a federal agency created by ERISA to protect private sector pension plans.  If your pension plan goes belly up, the PBGC wills step in and its insurance program will pay your pension benefits up to certain limits, depending upon your age and when your plan fails or your employer enters bankruptcy.  The PBGC is funded entirely by insurance premiums from the companies its protects, assets from plans for which it serves as trustee, recoveries from former plan sponsors, and its investments.  The PBGC is not funded with tax dollars.

2018 Pension De-Risking Summary

2018 saw many pension de-risking transfers, and industry experts expect this trend to continue unabated into 2019. In fact, Bristol-Myers Squibb has already announced a $3.8 Billion transfer to Athene Annuity and Life Company for August, 2019.  We will have to wait and see if that pension risk transfers tops the 2019 charts.

Some of the larger pension de-risking transfers of 2018 were:

Ball Corporation of Broomfield, Colorado – $220 Million in pension liabilities transferred, affecting 11,000 retirees.

Federal Express, Memphis, Tennessee – $6 Billion in pension liabilities transferred to Metropolitan Life Insurance Co.

Materion Corp., Mayfield Heights, Ohio – $111 Million in liabilities transferred to Mutual of America Life Insurance Company

International Paper – transferred $1.6 Billion in pension liabilities to Prudential Insurance Company of America

Devon Energy, Oklahoma City, Oklahoma – transferred $190 Million in pension liabilities

Archer Daniels Midland Company, Chicago, Illinois – transferred $500 Million in liabilities to Prudential

AK Steel, West Chester, Ohio – transferred $280 Million to Massachusetts Mutual Insurance Company

Boise Cascade Company, Boise, Idaho – Two separate transactions in 2018, one for $152 Million, and the other for $122 Million both to Prudential