Amend ERISA and Protect Earned Benefits

By Edward Stone, Esq.

The Association of BellTel Retirees, in collaboration with Retirees for Justice, is planning to introduce proposed amendments to the federal ERISA law, to protect retirees from discrimination and force more transparency and accountability in the Pension Risk Transfer (PRT) arena.

As some of you may already know, there is a distinction under ERISA between what is a “fiduciary” function – that requires plan sponsors to act in the best interest of plan participants – and what is a “settlor” or administrative function that does not trigger ERISA’s fiduciary standards.

This distinction has been a thorn in retirees’ keisters for decades since companies have been able to simply say “business decision” when it comes to paying retiree earned benefits. For example, the decision to amend or terminate a pension plan through the purchase of a group annuity contract is considered a settlor decision that does not implicate fiduciary duties.

On the other hand, there is a Department of Labor (DOL) Interpretive Bulletin that requires defined benefit plan sponsors to act in a fiduciary capacity when they choose the insurance company that takes over for a Plan Sponsor. While this is a positive for retirees, there are no clear guidelines for determining how a Plan Sponsor complies with this requirement in choosing what is supposed to be the safest available annuity.

Retirees for Justice has proposed a number of criteria to the Acting Assistant Secretary of U.S. Department of Labor that we believe should factor into the choice of annuity. A copy of my letter to Asst. Secretary Khawar is available on the Retirees for Justice website. Our goal in reaching out to the Department of Labor is to encourage the DOL to look closely at the scope and pace of the Pension Risk Transfer business and force insurance companies to be more forthcoming about their ability to make good on pension promises.

This issue is starting to get traction due to the enormous volume of large Private Equity backed insurance acquisitions that have taken place over the past year. Needless to say, Private Equity firms do not have a great track record when it comes to looking out for policyholders.

Some of the issues we highlighted include the need for consistent accounting treatment and proper reserving at the insurance company level and with respect to all reinsurers and affiliates. When insurance companies use affiliated captive reinsurers to move liabilities around, pensioners are at risk.

We also asked for the use of real separate accounts for all PRT deals so there is no “co-mingling” of assets and so reporting can be more useful.

Finally, we are pushing for better disclosures and the elimination of certain hocus pocus accounting practices that allow insurers to show more in capital and surplus than they actually have. ERISA’s protective purpose has been eroded over the years and we want to bring it back!

Our latest research suggests that the total volume of Pension Risk Transfer deals that have been consummated with insurance companies since 2012 will surpass $210 Billion by year’s end! No matter how you slice it, that’s a lot of Billions!

Retiree earned benefits are not handouts and Retirees for Justice is fighting alongside the Association of BellTel Retirees to protect your earned benefits. Membership is open to all members of the Association of BellTel Retirees.

Take action and join us by emailing at info@retireesforjustice.org or head over to www.retireesforjustice.org.

 

This article was originally published in the 2021 Winter Newsletter.