According to a recent survey by Mercer, more defined benefit plan (DBP) sponsors seek to de-risk due to volatile markets and uncertain costs. Mercer also reported that risking Pension Benefit Guaranty (PBGC) premiums have a significant impact on funding decisions. In a June 25, 2019 press release, Matt McDaniel, head of Mercer’s US Financial Strategy Group, was quoted as saying “Given the challenges of increased market volatility and uncertain costs plan sponsors face today, many are reevaluating how they want to achieve their long-term pension plan goals. We are seeing many sponsors take a critical look at their strategic roadmap, including the supporting policy actions and governance structures that will guide them into the future. There was an acceleration of such activity in the past two years, and plan sponsors expect continued evolution in the next few years.”

This same Mercer survey found that 70% of survery respondents were likely to transfer some or all of their retirees obligations to an insurance company through the purchase of an annuity in 2019 or 2020.

Earlier this year two companies announced the purchase of group annuity contracts from Pacific Life Insurance Company for the purpose of pension de-risking.  In a $370 million transaction, S&P Global transferred its obligations to 4,600 retirees to Pacific Life.  Lennox International, the heating and cooling company transferred $100 million in pension obligations to Pacific Life Insurance Company.  In 2016, Lennox offered lump-sum buyouts to vested participants.  Few details were released about either of the Pacific Life transactions.

Louisiana’s Structured Settlement Protection Act (SSPA) was just revised, adding some additional provisions which may help curb some of the factoring industry abuses.  Unfortunately, some of the new provisions are designed to protect the factoring companies, and not those selling their structured settlement payments.  The new legislation, which goes into effect on July 1, 2020 provides that (1) factoring companies register with the secretary of state, be qualified to do business in Louisiana, and post a $50,000 bond; (2) any petition must be brought in the parish (county) where the seller resides; and (3) the seller receive independent professional advice.  But judicial oversight of structured settlement transfers is crucial, and the revised statute does not set forth any specific criteria that must be considered by the judiciary before approving a transfer of structured settlement periodic payments.  Our warnings to all sellers still apply:  BE CAREFUL!  The factoring companies (and their sales reps) are not your friends.  They want you to sell so that they can earn a commission.  Most of the “deals” they offer you are no deal at all.

Dana Incorporated, the Maumee, Ohio based maker of power-conveyance and energy management solutions for vehicles and machinery has now transferred all liabilities associated with the Dana Retirement Plan, by purchasing group annuity contracts for the remaining plan participants.  The company contributed approximately $62 million in cash to the Retirement Plan in order to facilitate the purchase of two group annuity contracts. One contract, purchased from Athene Annuity and Life Company (a subsidiary of Athene Holding Ltd.) will cover all but the New York retirees. New York retirees will receive their pension benefits in the form of annuity payments from Companion Life Insurance Company, a subsidiary of United of Omaha Life Insurance Company. Dana’s retirees will begin receiving payments from the two insurance companies in October, 2019.




Avery Dennison, the global manufacturer and distributor of adhesive materials, apparel branding labels, and specialty medical products headquartered in Glendale, California transferred approximately $750 million of its pension obligations to American General Life Insurance Co. in May 2019. This pension de-risking transfer affects about 8,500 retirees.  In July 2018, Avery Dennison terminated its US defined benefit plan, and subsequently contributed $200 million to the plan before making lump-sum buyouts available to certain plan participants, reducing its pension liabilities by about $152 million.  In March 2019, the company contributed $7 million to the DBP  to cover the costs association with the pension de-risking transfer.

According to the 2019 Pension Risk Transfer Poll sponsored by MetLife, most companies plan to rid themselves of their pension liabilities in the future.  Pension de-risking transfers topped $26 Billion in 2018, up 14% from 2017.  Pension de-risking since 2012 exceeds $125 Billion.  2019 is on-track to be a big year for pension de-risking.  According to LIMRA Secure Retirement Institute pension de-risking transfers (what they term “buy-out” sales) were $4.75 Billion in the 1st Quarter of 2019.

Scams in the structured settlement secondary market abound.

If you are the recipient of a structured settlement annuity and receive a phone call from someone who says “I work with your insurance company and you are owed money” just hang up the phone.  The caller doesn’t work with your insurance company, and you aren’t “owed any money.”  The caller wants you to sell your annuity payments, and will likely offer you just pennies on the dollar.

Likewise, if you receive a phone call from someone who says “I work with your insurance company and we can restructure your annuity” just hang up the phone.  The caller doesn’t work with your insurance company and they can’t “restructure” your annuity.  The caller wants you to sell your annuity payments, and will likely offer you just pennies on the dollar.

Senator Andrew Gounardes (D. 22nd) has sponsored a “same as” bill – S4864 to accompany A5818 – “AN ACT to amend the insurance law, in relation to providing protection to certain retirees from pension de-risking transactions; and to amend the civil practice law and rules, in relation to statutorily exempt payments” sponsored by Assemblyman Peter Abbate.   This bill has been referred to the Insurance Committee.  The introduction of the “same as” bill in the New York Senate is very important.  In New York State, both the Senate and Assembly must pass a bill before the Governor can sign the bill into law.

Pension de-risking through the purchase of a group annuity contract is a concern to retirees because retirees lose all of the uniform protections intended by Congress under ERISA and their rights become subject to non-uniform state laws. Enactment of legislation at the state level is needed to replace these protections.  NY’s proposed legislation will provide those protections to New York retirees impacted by pension de-risking transfers.  This legislation will provide basic financial disclosures, protections of annuity benefits from creditors, and reasonable restrictions on subsequent transfers.

Download text of New York Senate Bill 4864.

Download text of New York Assembly Bill A5818.

Pension de-risking protections have already been enacted in Connecticut and Virginia.  Read more about pension de-risking here and here.

The IRS released a new notice earlier this month, which will allow defined benefit plan (DBP) sponsors to once again offer lump-sum buyouts to retirees who are receiving pension benefits. This practice of lump-sum buyouts was effectively halted in 2015  with the release of IRS Notice 2015-49. Prior to the 2015 IRS Notice, DBP’s regularly offered lump-sum buyouts to retirees in an effort to reduce their pension liabilities.  Lump-sum buyout’s are lucrative for the DBP’s but are often detrimental to retirees.  As stated in Forbes: “The idea of an employer-sponsored defined benefit pension plan is that you (and your spouse) get guaranteed payouts for life. As the plans became a drag on corporate balance sheets, companies started shedding pension liabilities by offering participants the option of taking a lump-sum buyout (cash) or transferring their pension to an insurer who would continue the lifetime payments. For retirees who say yes to the lump-sum offers, it wipes out federal protections of ERISA and turns lifetime retirement income into a one-time chunk that can easily be outlived.”

IRS Notice 2019-18 supersedes IRS Notice 2015-49.

A recent Appellate Court opinion from the 4th District in Illinois highlights more structured settlement factoring fraud.  In this instance, Stone Street Capital, LLC purchased payments in four separate transactions from 2010 – 2013 filed in Sangamon County, Illinois.  Stone Street filed four transfer petitions seeking to purchase structured settlement annuity payment streams from a “seller”, each of which was granted by the Sangamon County Circuit Court.  The fraudulent transfer petitions were filed by Chicago attorney, Brian Mack.  In the petitions, Mack failed to inform the court that the “seller’s” annuity contract contained an anti-assignment provision. As it turned out, the real recipient of the structured settlement annuity knew nothing of the transactions.  The signatures on the affidavits and petitions were forged by the seller’s mother, and falsely notarized by a friend of the seller’s mother.

In 2016, the victim of this fraud filed lawsuits claiming the Sangamon Circuit Court orders were void ab initio due to lack of jurisdiction and fraud on the court. Despite the evidence, it was 17 months before Stone Street agreed to vacate the transfer orders and return the funds to the “seller.”  After the settlement the court retained jurisdiction to adjudicate any petition filed for sanctions pursuant to Illinois statute.  The victim filed a motion for sanctions against Stone Street in September, 2017,, which was denied.  On appeal, the trial court’s decision was reversed.

The Appellate Court stated:

We find the trial court abused its discretion in denying the motion for sanctions on this issue.  Since 1999, the Illinois Appellate Court has repeatedly held that where a structured settlement agreement contains an anti-assignment provision, that provision must be enforced an renders any attempt to assign structured settlement payments void.  Stone Street cannot plead ignorance of this case law as attorney Mack was heavily involved in many of those cases.  More importantly, Stone Street was thus bound by that case law when it presented its petitions to the trial court. However, in its first two petitions, Stone Street did not reference the possible existence of an anti-assignment clause, suggesting an attempt to  hide this fact from the court. Such conduct cannot be countenanced.

Given the totality of Stone Street’s conduct in connection with the four petitions at issue in this appeal, we find sanctions under Supreme Court Rule 137 (eff. July 1, 2013) are appropriate. As the trial court abused its discretion in denying [the victim’s] motion for sanctions, we remand for further proceedings on her motion.

Not all of the fraud here can be blamed on the factoring company – Stone Street.  The victim’s mother had a hand in this as well. However, it is the duty of the petitioner – Stone Street to comply with the Illinois Structured Settlement Protection Act (215 ILCS 153/1 to 35 (West 2010)).

Fraud in the structured settlement secondary market is rampant. If you have a been a victim of fraud, please call us at (203) 504-8425 or (646) 933-3143.