DennisBeaverApril 20, 2018 • By Dennis Beaver 

If you have any type of insurance policy from MetLife – in fact from any insurance or annuity company – our story should cause you to take certain steps to protect future payments, and we begin with this question:

“Does the insurance company know where you live? Can they contact you or your family members?”

MetLife is one of the world’s largest insurance companies. Stand on any street corner from Hong Kong to cities in South America and in no time a bus will come by with an ad for MetLife.

While “big” may have advantages, it can also have considerable drawbacks, such as “too big” to know who they insure, and who is supposed to receive monthly annuity payments.

Last December, this mammoth insurance company announced that it had a little problem. MetLife admitted “Internal failures resulting in not making payments to tens of thousands of pensioners stretched back a quarter of a century.”

Downplaying the significance of this event, the company “Believed the group missing out on the payments represented less than 5 percent of about 600,000 people who receive a type of annuity payment with average benefits of less than $150 a month.”

“But that’s 30,000 workers harmed by this failure!” outraged New York attorney Edward Stone tells You and the Law. “Metlife does not even know how many years back these unpaid pension obligations go, but retirees were owed a defined amount of monthly income when MetLife took on responsibility for the pensions from their employers, which is known as pension risk-transfer or pension de-risking.”

While Stone is one of a handful of attorneys in the nation who deal with the consequence of life insurance companies getting in financial hot water, he was quick to point out that “No one is concerned about MetLife’s immediate financial viability, and policyholders shouldn’t panic and jump to another insurance company without careful thought, but these events are highly disturbing.”

Stone points out retiring workers with pensions were promised a defined amount of money from their employer, designed to last a lifetime. “Pensions are a very different animal today than in the past, and it is something that people working or retired need to be aware of.”

That’s because, in large part, over the past few years “It became apparent to companies that retirees were living much longer and costs were ballooning from having to write years of additional pension checks,” he notes, adding, “And the major life and annuity companies saw this fear as a huge source of new money, billions of dollars in new money and so they did something about it.”

And what they did was highly attractive to huge corporations with substantial pension obligations. “Some of the world’s largest life insurance and annuity companies approached industry and said, ‘We will take over paying benefits to your retired employees. Just give us the billions of dollars you are now managing, and we will assume responsibility for their monthly payments. We know what we’re doing, as we’ve been at it for years. We’ll invest the money and keep your retirees happy – and in the dark!”

The term “pension-risk transfer” means that, “The risk to the employers’ bottom line in being able to earn enough money to pay retirees gets transferred to an insurance company. This phenomenon has grown at a worrisome rate over the past few years. When this happens, pension benefits are no longer governed under ERISA and retirees become subject to non-uniform state law.”

An annuity is a promise by a life insurance company to pay out a certain amount of money to a policyholder for their lifetime or a set number of years. If you spoke with insurance company executives before the Great Recession they would have told you that funding an annuity is pretty simple.

As Stone explains: “Traditionally insurance companies would simply match fund liabilities with government or high-grade corporate bonds that paid out enough interest to satisfy what its payment obligations were to annuitants or certificate holders But with rates at virtually nothing these past few years companies are scrambling to earn more on their assets with things that are far less safe than highly rated corporate or municipal bonds.”

Edward Stone has this advice for all policyholders and their family members:

“Keep the company aware of where you are. Check in at least once a year. Prevent them from losing you by being pro-active.” is a website we recommend for anyone who can see themselves or their family affected by these issues.

Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.