PA 15-167—sHB 6772

Insurance and Real Estate Committee

AN ACT EXTENDING CREDITOR PROTECTION TO AMOUNTS PAYABLE TO A PARTICIPANT OF OR BENEFICIARY UNDER AN ANNUITY PURCHASED TO FUND EMPLOYEE OR RETIREE RETIREMENT BENEFITS

SUMMARY: By law, creditors cannot claim interests in and payments from certain accounts, including certain retirement accounts, simplified employee pension plans, and medical savings accounts. This act extends this protection to certain allocated and unallocated group annuity contracts. (Employers may enter into group annuity contracts to fund employee retirement benefits or otherwise decrease the risk associated with managing a retirement plan. )

Under the act, a group annuity contract is exempt from creditors' claims if it is issued to an employer or a pension plan to provide employees or retirees with defined retirement benefits, and:

1. the retirement benefits were protected under the federal Employee Retirement Income Security Act (ERISA) or Pension Benefit Guaranty Corporation (PBGC) before the effective date of the group annuity contract, and

2. the group annuity contract is not protected by ERISA or the PBGC (see BACKGROUND).

EFFECTIVE DATE: October 1, 2015

BACKGROUND

ERISA and PBGC

ERISA sets minimum standards for private pension plans, including standards for participation, vesting, benefit accrual, funding, and pension management responsibility. Under ERISA, most private defined benefit pension plans are required to obtain pension benefit insurance through PBGC.

PBGC provides payment of certain benefits if these plans are terminated (e. g. , when the employer can no longer meet the plan's fiduciary obligations).

OLR Tracking: AR: mk: pf: bs