New York State Assemblyman Steven Katz (R,C,I - Yorktown -94th District) representing parts of Westchester and Putnam Counties has introduced legislation to protect retirees whose pensions get sold or spun off by their former employers. Many thousands of retirees across New York and nationally have seen their hard earned pensions transferred to insurance companies, thus entirely divesting retirees of all federal Employee Retirement Income Security Act (ERISA) protections.
The legislation (A-8161) will protect retirees from pension stripping transactions (a.k.a: de-risking), when companies sell or transfer the pensions of retirees to an insurance company without the retirees’ consent. This has the effect of converting pensions into annuities, which causes the retiree to then lose uniform federal protections under ERISA and the Pension Benefit Guaranty Corporation (PBGC).
In 2013, Verizon sold off 41,000 former management retiree
pensions to Prudential Insurance Company and many of those retirees are current
New York residents. General Motors sold off 76,000 retirees’
pensions to Prudential Insurance in 2012.
Assembly Member Steven Katz said, “I think that the economic crisis of the past 5 years has demonstrated that we need to protect those that could be financially vulnerable. This bill ensures that pensions retain all protections under the Employee Retirement Income Security Act rather than being packaged into an unprotected annuity.”
Assemblyman Katz was joined by New York retirees impacted by the pension sell-off. They expressed fears about the transaction, loss of ERISA and PBGC protections and concerns over the insurance industry’s ability to meet future financial obligations to retirees.
John Hyland of Brewster, NY, who served as union chief steward for the Communication Workers of America (CWA) at NYNEX said, “Retirees are afraid for their financial future because their pensions are being sold off to insurance companies. Retirees should not have to worry and wait to see if their pensions get sold off. We urge the State of New York to come to the rescue of retirees to stop this from happening.”
Cohen of Yorktown Heights, NY and Executive Vice President of the 128,000
member Association of BellTel Retirees, was one of the 41,000 retirees whose
pension was sold by Verizon said, “Never in a million years did any of us think
we had to worry about our pension being sold off. All 41,000 of us were
completely blind-sided by the Prudential Pension Asset transfer, nor did we
receive adequate notice. This secretive transaction stole the protection
provided to me and fellow retirees by ERISA and the Pension Benefit Guaranty
Corporation. Gone too is our peace of mind.”
Edward Stone, an attorney specializing in annuity and pension risk matters said, “When the Verizon/ Prudential transaction took place 41,000 retirees were dumped into an inferior safety net, governed not by a uniform federal law, but rather a patchwork of non-uniform state guaranty association laws. I do not believe that the state guaranty safety net is sufficient to support an insolvency of a company as large as Prudential. As we learned in the recent financial crisis, no company is too big to fail and Prudential is no exception.”
Stone’s concerns spotlight a major financial fear for America’s retirees.
Unlike PBGC coverage, state guaranty association coverage is not uniform and
ranges from $100,000 to $500,000 per lifetime. Only four states (NY, NJ,
CT and WA) have $500,000 of potential lifetime guaranty association
coverage. Retirees that relocate to other states may unwittingly divest
themselves of guaranty association coverage. Retirees relocating to Arizona,
Puerto Rico, Nevada, Massachusetts, Alaska, Indiana, Mississippi, Missouri and
New Hampshire could find themselves with just $100,000 of coverage.
28 other states have coverage limits of $250,000 and 10 states have a
$300,000 lifetime cap.
Steed, a Montgomery, NY resident and a former Verizon CWA
union Telecommunications Technical Associate said, “These 41,000
management retirees are likely not the last group of retirees to get sold
off. It is only a matter of time until union retirees’ pensions are
sold. We are here to support this legislation and to advocate for the
continued ERISA and PBGC protections our fellow retirees rely upon.”
Eileen Lawrence, a Verizon retiree from Douglaston, NY and a leader of the non-profit ProtectSeniors.Org said, “I dedicated 37 years to Verizon, and to have our former employer strip our pensions from the protections of the PBGC, and move them to an annuity company is morally wrong and it breaks a fiduciary commitment to us. It is sad how big businesses really do not care about the people who helped them grow, but only their bottom line. Companies must not get away with this.”
Pam Harrison, a Kent Lakes, NY resident said, “We cannot let companies continue to dump retirees’ earned pensions. This cannot and must not become a national trend. While, Verizon has not yet sold off its union pension plans, I hope the state legislature acts quickly before they harm even more of us.”
companion bill to A-8161 is being introduced in the NY State Senate by Senator
Tony Avella (D/ District 11) of Queens.