Insurance and Real Estate Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-493

Title:

AN ACT CONCERNING THE PURCHASE OF AN ANNUITY TO FUND PENSION BENEFITS.

Vote Date:

3/9/2017

Vote Action:

Joint Favorable

PH Date:

2/16/2017

File No.:

SPONSORS OF BILL:

Insurance & Real Estate Committee

REASONS FOR BILL:

The bill intends to protect the pension and benefits of citizens by limiting the transfers of annuity funds and requiring the companies executing such transactions to notify the employees being affected when an annuity contract is purchased to fund retirement benefits. The legislation is intending to create more transparency and accountability within such transfers.

RESPONSE FROM ADMINISTRATION/AGENCY:

State of Connecticut Insurance Department, submitted testimony stating that insurance companies are already required to make notification to consumers when annuities are being used to fund pension under state law. The CID pointed out that there is a process by which the department reviews all such contracts before it reaches the market to check its complicity with state law. These laws include provisions regarding policyholder disclosure and notification. They also stated that the Federal Department of Labor would provide the oversight in any case regarding the employee notice of a change in pension plan under the

Employee Retirement Income Security Act. (ERISA)

State Senator Carlo Leone, 27th District, submitted testimony outlining the need for the proposed legislation because of the transparency and accountability it would create in a situation where annuities have been purchased to fund pensions. He stated the individuals whose pensions are being affected should be notified of the transaction details in order to make sure they know what is happening in that transfer and to be able to plan accordingly in regard to their finances. He pointed out that companies would only be able to transfer annuities to another company that maintains an “A” or better rating under the bill and that the insurance commissioner would have oversight in relation to the proposed policy

NATURE AND SOURCES OF SUPPORT:

William Jones, Co-Founder, ProtectSeniors.Org, submitted testimony outlining his personal experience with the transfer of his pension from Verizon to Prudential. He stated that he lost the federal protections associated with retirees that have defined benefit pensions when his pension was transferred.

Edward Stone, BellTel Retirees Inc., submitted testimony outlining the specific cases of “de-risking” transfers that have affected people in Connecticut. He referenced the steps the state has taken to protect retirees impacted by pension risk transfers but stated that these protections fall short of what is needed. He stated further protections are necessary to prevent a company from transferring retiree benefits to another company that may not be as fiscally solvent.

Jack Cohen, Chairman, BellTel Retirees, Inc., submitted testimony explaining his personal connection to the issue and his story regarding the transfer of his pension. He stated that when his pension was transferred and converted into a group annuity, he and his peers in a similar position subsequently lost the ERISA protections that had existed under his previous pension plan as it had been prior to the transfer. He reiterated that when corporations “de-risk” their pension obligations that they are placing the “risk” on the beneficiary.

NATURE AND SOURCES OF OPPOSITION:

Eric George, President, Insurance Association of Connecticut, submitted testimony stating that the bill is premised upon faulty presumptions that ignore existing legal requirements, create unnecessary exposure for insurers and potential confusion within the marketplace. Retirement benefits provided through an annuity contract are already subject to law established by ERISA and enforced by the USDOL and any change to notification procedures should be adopted by that agency. State based regulation that may conflict with the federal standards, thus creating confusion by the actors win the market.

Reported by: Matt Hoey

Date: 3/21/2017