On December 18, 2018, MetLife agreed to a consent decree with the Massachusetts Secretary of State, William Galvin, resulting from its failure to properly administer its pension risk transfer products under which it issued group annuity contracted to make payments in lieu of all or a portion of the benefits due to a participant under a pension plan
Under the Consent Order, MetLife paid a $1 million administrative fine and agreed to report its efforts to correct its errors in failing to properly maintain contact with retired annuitants and pay them their pensions.
Consent agreement resulted from a complaint about reserve takedowns for “Presumed deceased” annuitants
On June 25, 2018, the Secretary of State’s Securities Division filed an administrative complaint against MetLife. The complaint alleged that MetLife had made materially misleading statements in its statutory public filings relating to its financial transaction involving group annuities it acquired from various pension plans of twenty-six companies.
In particular, the complaint charged that MetLife had profited through the takeover of employer pension plans. In these transactions, known as pension risk transfers, MetLife acquired the assets of defined benefit pension plans and converted them into group annuity contracts.
These acquisitions have made MetLife primarily responsible for paying billions of dollars in retirement benefits.
According to the complaint, MetLife had acknowledged it had relied on inadequate procedures to contact certain retirees, many of whom may be completely unaware that their former employer has offloaded its pension responsibilities to MetLife.
The complaint alleged that in thousands of cases, MetLife made only made perfunctory efforts to reach retirees who were owed benefits by MetLife as the result of the pension transfer.
MetLife’s efforts to contact its annuitants about the benefits owed consisted entirely of its mailing two first-class letters to these annuitants: One at age 65 and the second at age 70 1/2.
According to the complaint, MetLife did not attempt to verify that the address of record was correct—even in cases where the initial letters were returned undeliverable. It also, MetLife failed to take any other steps to locate retirees to whom it owed benefits: No certified mail, no electronic mail, and no telephone calls.
When retirees failed to respond to both of its letters, MetLife categorized them as “Presumed Dead” and released the retiree’s benefit amount from the company’s reserves and booked the released reserve as income.
MetLife made no effort to confirm that the retiree was, in fact, dead before drawing down the reserve for their pension.
Before filing a complaint, Secretary Galvin’s office found retirees MetLife lost
As part of an investigation by the Secretary of State, MetLife provided a list of the missing pensioners to Mr. Galvin’s office that MetLife had recorded as “Presumed Dead” because of their failure to respond to either of MetLife’s letters.
Using an available database, the Secretary of State’s Office in two months found contact information for the annuitant and advised them or their survivors how to claim their pension money from MetLife.
According to the Secretary of State, the average age of the Massachusetts resident retirees affected by MetLife’s failure to locate them was 72.
The Consent Order requires MetLife to confirm payments, maintain contact, and pay a $1 million fine
The December 18, 2018 Consent Order entered into by MetLife resolved the June 25, 2018 complaint and required MetLife, among other actions, to:
- Certify its payments as of the date of the Order, including the identity of each annuitant, the retroactive amount paid, the interest on the retroactive amount paid, and the amount of the monthly benefit amount;
- Identify the Massachusetts annuitants that MetLife has confirmed as deceased as of the date of the Order, the identity of their beneficiaries, any retroactive amounts paid to these beneficiaries, any interest on the retroactive amounts paid to the beneficiaries, and the monthly benefit amount involved;
- Continue to take reasonable steps, as specified in the Order, to locate the Massachusetts annuitants eligible for benefits under MetLife group annuity contracts, process all past due amounts plus any interest owed, and effect all continuing payments.
- By March 31, 2019, provide to the Secretary of State a copy of the formalized written policies and procedures designed to establish and maintain contact with annuitants whose benefits have not commenced.
- Pay by December 28, 2018, an administrative fine of $1 million to the Commonwealth of Massachusetts.
How to obtain a copy of the Consent Order
For a free copy of the Consent Order between MetLife and the Secretary of State, send your request to scotter@agencychecklists.com.
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