Filed as Senate Bill 1092 and Assembly Bill 6796, a new initiative in the New York State Legislature seeks to expand and strengthen scrutiny paid to pension risk transfer transactions enacted by employers in the state.
State Senator Tony Avella, a Democrat from New York’s 11th District, introduced the bill alongside Assembly Member Peter Abbate, a Democrat from the 49th District. The identical bills would require that companies moving to convert pensions to annuities provide “proper disclosures related to the transaction for all impacted retirees.”
As Abbate and Avella note, “The purpose of the bill is to provide necessary protection to retirees whose pension plans are entirely divested of all Employee Retirement Income Security Act [ERISA] and Pension Benefit Guaranty Corporation [PBGC] [safeguards] as a result of a group annuity purchase from a life insurance company.”
The bill also prohibits the subsequent transfer of the retirees’ pension benefits without the confirmation of the New York State Superintendent of Financial Services that the insurer acquiring the group annuity contract has the financial strength to fulfill its long-term obligations to all retirees.
Specifically, provisions of the bill would amend state insurance law by adding a new Section 3219-a to New York’s Civil Practice Law and Rules (CPLR), relating to pension de-risking transactions with an annuity. The section requires that an annuity issued by an insurance company licensed to do business in the state, which sells an annuity intended to provide pension benefits to retirees of any company, corporation, limited liability company or association must include the following features:
- A clear statement that payments to annuitants under an annuity contract issued pursuant to this section are exempt from the claims of creditors;
- A statement that the retirees will no longer have protection under ERISA and the PBGC;
- The identity and contact information for the New York Life and Health Insurance Guaranty Association, or any substitute or replacement guaranty association that provides coverage to annuitants residing in New York in the event of the insurer’s financial impairment or insolvency, as set forth on a publicly available website such as that maintained by the Life Insurance Co. Guaranty Corp. of New York (www.nylifega.org); and
- Mandatory annual disclosures to all retires whose benefits are transferred to an insurance company or alternative benefit provider for the purpose of providing retirement benefits, of the following: funding levels of all assets relative to expected liabilities under the assumed pension benefit schedules, investment performance summary by asset class, investment performance detail by asset class, expenses associated with any group annuity contract, changes in actuarial assumptions, if any.
Other provisions will prohibit transfer or assumption of pension assets and liabilities to another insurer without confirmation by the superintendent that the insurer assuming the obligations of such allocated or unallocated group annuity contract has the financial strength to fulfill its obligations under such contract. In addition, the proceeds of any such allocated or unallocated group annuity contract issued “shall be exempt from application to the satisfaction of money judgments under Section 5200 give of the CPLR.”
Section 2 of the bill amends Paragraph 2 of Subdivision (1) of Section 5205 of the CPLR, as amended by Chapter 24 of the laws of 2009, by adding that “Statutorily exempt payments” shall specifically include “any annuity proceeds whose benefits are transferred to an insurance company or alternative benefit provider for the purpose of providing retirement benefits pursuant to Section 3219-a of the insurance law in a pension de-risking transfer.”
Section 3, lastly, sets forth an effective date of 120 days “after [the bill] shall have become law and shall apply to all policies and contracts issued, renewed, altered, or amended on or after such date.”
Full text of the bill is available here.