Deceased NFL Players test Positive for CTE

Chronic traumatic encephalopathy (CTE) has been identified in 96% of the deceased NFL players that have been examined by researchers with the Department of Veterans Affairs and Boston University. Signs of CTE can be identified in living persons using brain scans, but as yet the disease can only be positively identified posthumously. Researchers believe that CTE comes from repetitive trauma to the head.  The recent data from the research might be skewed since the study uses brains that have been donated for testing, and many of the individuals who have made provisions for posthumous testing have done so because they suspected CTE. However, in an interview with Frontline, Dr. Ann McKee, Chief of Neuropathology with the VA Boston Healthcare System said the latest numbers were  “remarkably consistent” with past research suggesting a link between football and CTE.

The bottom line is this:  CTE is real and it is seen at high rate in the brain tissue of athletes who were subjected to repeated head trauma. And in a cruel twist, the NFL Concussion Settlement will provide no awards for players who die from CTE after the settlement date.

J.C . Penney Announces Pension De-Risking Annuity Purchase

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Today,  J.C. Penney announced that it would continue its pension de-risking efforts by purchasing a group annuity contract from The Prudential Insurance Company of America. While exact numbers of retirees affected and the terms of the agreement have yet to be released, it appears that this pension de-risking transfer is an annuity “lift-out” and the company’s defined benefit plan will not be terminated but the number of participants in the plan will be reduced by 25-35%. The annuity purchase is expected to close in December 2015.  Last month J.C. Penney offered lump-sum payments to retirees and the company reported that approximately 12,000 retirees elected to receive these lump-sum payments.

As we predicted, more companies are seeking to enter into pension de-risking annuity transfers and the need for state legislation protecting retirees is even more important.  Connecticut’s ground-breaking legislation,  Public Law 15-167, An Act Extending Creditor Protection to Amounts Payable to a Participant of or Beneficiary Under an Annuity Purchased to Fund Employee or Retiree Retirement Benefits, went into effect yesterday.

Law Protecting Connecticut Retirees takes effect today!

Governor Dannel P. Malloy (D) signed into law Public Act 15-167 on July 2, 2015 providing creditor protections to retirees in pension de-risking transfers.  Public Act 15-167 takes effect today. Prior to the enactment of this ground-breaking legislation, annuity payments intended for retirement could be garnished by creditors in Connecticut. Edward Stone Law, on behalf of ProtectSeniors.org, a nonprofit retiree advocacy organization, and legislative sponsor Rep. Robert Megna (D-97), Chair of the Connecticut State Insurance Real Estate Committee and co-sponsors Rep. Livvy R. Floren (R-149), Rep. Louis P. Esposito , Jr. (D-116) and Senator Henri Martin (R-31) worked to pass this legislation in record time.

Illinois Structured Settlement Protection Act – revised

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Revisions to the Illinois Structured Settlement Protection Act, 5 ILCS 153/1 went into effect last month in the wake of Settlement Funding, LLC v. Brenston, 998 N.E. 2d 111 (Ill. App. Ct. 2013) where the Illinois Appellate Court held that the trial court erred in permitting a transfer where the settlement agreement contained an anti-assignment clause and the factoring company failed to disclose this to the court. Among the changes to the Illinois Structured Settlement Protection Act are provisions permitting an “interested party” to waive these assignment prohibitions. The revisions to the Illinois Structured Settlement Protection Act also include provisions designed to address “forum shopping” inside the state by requiring that transfer petitions be filed in the county where the payee lives.

Pension De-Risking Continues

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Companies continue to de-risk their pension plans at a rapid pace.  J.C. Penney Co., based in Plano, Texas offered 31,000 retirees a lump sum buyout offer which expires today.  This offer follows an earlier lump sum buyout offer in 2012 that 25,000 retirees elected to take. While the I.R.S. restricted lump sum buyouts with new regulations issued in July of this year, J.C. Penney was permitted to move forward as they apparently met one of the exceptions provided for in I.R.S. Notice 2015-49.  This may not be the last pension de-risking move for J.C. Penney Co., and the move may include the purchase of a group annuity contract.  Joey Thomas, a spokesman for J.C. Penney is quoted in Pensions & Investments as saying “We monitor the annuitization market on an ongoing basis to evaluate if there are opportunities to further derisk the pension plan in a cost-efficient manner.” In August, E.W. Scripps Co. based in Cincinnati offered the option of a lump sum or immediate annuity to 4,300 retirees.  Company funds were not used to make the lump sum distributions, and the Scripps defined benefit plan (DBP) funding ratio remains at 80%. We’ve said this before, but we will say it again – now that the I.R.S. has limited lump sum distributions to retirees we expect to see more pension risk transfers via the purchase of group annuity contracts. This makes pension de-risking legislation protecting retirees all the more important. Connecticut’s new law, Public Law  15-167, An Act Extending Creditor Protection to Amounts Payable to a Participant of or Beneficiary Under an Annuity Purchased to Fund Employee or Retiree Retirement Benefits, goes into effect on October 1, 2015.

Judicial Reforms for Structured Settlements in Maryland

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The Washington Post reported that “Prince George County Circuit Court has implemented significant reforms” in its handling of structured settlement payment petitions filed pursuant to the Maryland Structured Settlement Protection Act. All sellers and their independent advisors must now appear at the hearings, and all petitions must be filed using the seller’s full name, rather than initials. Judge Herman C. Dawson who previously presided over the transfer petition hearings will no longer do so. Unfortunately, as this latest article on the structured settlement industry by Terrence McCoy points out, loopholes in the Maryland Structured Settlement Protection Act “benefit the companies” purchasing these structured settlement payments. More judicial reforms such as those being implemented in Prince George County would go a long way in protecting the recipients of structured settlements.

Bill Introduced in District of Columbia on Structured Settlements

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Council members Mary M. Cheh (D-Ward 3), Charles Allen (D-Ward 6), Anita Bonds (D-At Large), David Grosso (I-At Large) and Brandon T. Todd (D-Ward 4) introduced a structured settlement protection act to protect District of Columbia residents seeking to sell their structured settlement payment streams. While we agree with the op-ed in The Washington Post on September 11, 2015 by legal aid attorneys Heather Latino and Thomas Papson that the proposed legislation is a “huge step toward ensuring that District residents with structured settlements from personal injury cases are not victimized a second time by a company seeking to purchase their settlement payments” structured settlement protection acts need to ensure that they work to protect the recipients of structured settlements, not the companies purchasing the structured settlement payment streams.  This proposed legislation does not do enough.

U.S. Escapes Liability for Executive Life Annuity

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As the last of the Executive Life cases seem to be winding their way through the court system, the U.S. government escaped liability in Nutt et al v. United States, No. 14-CV-282, 2015 WL 3525191 (Fed. Cl. June 4, 2015)  for a contract it purchased in settlement of a wrongful death claim in 1983, where a man was killed by an intoxicated Army employee driving an Army vehicle. Distinguishing what appeared to be strong precedent for holding the U.S. liable for its obligations under the annuity contract it purchased from Executive Life, the U.S. Federal Court of Claims found that the Massie case did not apply as that case involved the Military Claims Act, 10 U.S.C. Section 2731, et seq. rather than the Federal Claims Tort Act. Judge Braden also emphasized that the terms of the settlement language did not evidence the government’s intention to guarantee the annuity payments.

Petition for pension de-risking rehearing filed in Lee v. Verizon

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Plaintiffs’ have filed a petition for re-hearing with the 5th Circuit in Lee v. Verizon Communs., Inc., 2015 U.S. App. LEXIS 14588 (5th Cir. Tex. Aug. 17, 2015), asking that the court re-visit its decision and preserving their right to appeal. Hopefully the 5th Circuit will realize that the risks associated with kicking retirees to the curb are just as important as managing pension volatility.

Wall Street Journal reports more companies to offer pension buyouts

The Wall Street Journal’s CFO Journal reported in “Tax  Policies Spur Companies to Offer Pension Buy-outs” that in the wake of the IRS’s recent decision to continue using its current mortality tables and new regulations limiting lump-sum buyouts,  Newell Rubbermaid and E.W. Scripps will offer lump-sum buyouts to thousands of former employees, with E.W. Scripps also offering an annuity option. Like many companies, E.W. Scripps froze their defined benefit plan several years ago, but will carry liabilities on its books as members retire and receive pension benefits.  Lump-sum distributions are not always the best option for retirees – many would do better with a guaranteed stream of income for life.