By Bill Braunlich
We’ve all heard it before: older Americans are the highest-turnout voting bloc, and Massachusetts is no exception.
Why, then, do our elected officials continue to prioritize the interests of big business over the needs of the people who voted them into office and keep them there?
Take the recent news story about MetLife defrauding hundreds of retirees by deeming people deceased after they failed to respond to just two notices, and then releasing their pension funds, inflating MetLife’s bottom line at the expense of a senior’s hard-earned retirement security.
To its credit, the Massachusetts Securities Division, under Secretary of State William F. Galvin, filed a complaint, yet one cannot help but wonder about the lax regulations that allowed MetLife to treat retirees and their pensions with such recklessness.
One of the most alarming trends negatively impacting retirees, one which has almost no state or federal oversight, is called “de-risking,” or as many impacted retirees like to more accurately call it, “pension stripping.”
When a company decides to strip pensions from its retirees, it sheds the “risk” by transferring retiree pension obligations to a third party, generally an insurance company, in exchange for a lump sum. The insurance company then pays an annuity to retirees that will never increase, even though pension plans once covered cost of living increases.
We saw this several years ago, when my former employer, Verizon, transferred the pensions of 41,000 retirees to Prudential, and again this year when FedEx transferred $6 billion in liabilities to MetLife.
Both the original employers and the insurance companies swear up and down that this maneuver does not impact the pension benefits received by retirees. So, a win for everyone, right? Wrong!
Elected officials, retirees, and anyone planning to retire in the near or far future must grasp that because pensions are uniformly protected under ERISA, a Federal law enacted in 1974 to protect retirees, they are much more secure than annuities. I repeat: pensions and annuities are not equal.
For one thing, without ERISA protections, retirees’ earned benefits may be up for grabs in some states and subject to creditor claims. This means that if you accidentally cause a car accident and get sued, all the retirement benefits your family depends on can disappear in the blink of an eye.
Annuities can be transferred to less solvent insurance companies without the informed consent of annuitants. While you may trust huge “too big to fail” companies like Prudential, they may not even be the ones managing your retirement. Insurance companies can merge or acquire risky businesses and the retiree has no say in the matter.
Under state law, insurance companies have no obligation to keep their retired group annuity holders up to date about how their assets are being invested–whether they’re in junk bonds or dubious investment schemes. There is virtually no transparency when it comes to annuities.
Finally, unlike ERISA-protected pensions, annuities do not receive the same protections in case of financial shortfall. Rather than the federal Pension Benefit Guaranty Corporation (PBGC), which backstops pensions and provides monthly benefits for life, annuities are subject to a patchwork of state guarantee associations, which are often underfunded or not funded at all.
For example, here in Massachusetts, residents have a lifetime coverage limit of $250,000 should the insurer managing the annuity fail, but this number varies greatly depending on where you live. If you’re only 60 or 65 years old, these protections won’t last too long and “coverage” amounts include retirees’ own assets, so the guaranty association safety net is really an illusion.
Retirees deserve transparency, accountability, and security when it comes to earned retirement benefits. Many of us sacrificed higher salaries during our working years to guarantee solid pensions.
At the end of the day, insurance companies like MetLife and the corporations they are helping to “de-risk” should not have more influence in our state capital than senior citizens when it comes to protecting earned benefits.
I look forward to my state legislators bringing senior citizens, their most dependable voters, to the table in a meaningful way and passing common sense laws that protect our retirement benefits.
Bill Braunlich is a ProtectSeniors.org statewide leader in Massachusetts. He worked in the telecommunications field for 48 years and now advocates on behalf of seniors to protect retirees’ earned benefits.