YORKTOWN, N.Y. -- State Sen. Tony Avella recently announced legislation that would protect retirees whose pensions get sold or spun off by their former employers.
Many thousands of retirees have seen their hard-earned pensions entirely divested of all federal Employee Retirement Income Security Act protections as a result of a group annuity purchase from a life insurance company.
The legislation would protect retirees from pension stripping (a.k.a de-risking), which transfers risks onto the shoulders of pensioners when a company sells-off the pensions of its retirees, usually to an investment fund or insurance company, often without the retirees’ consent. This has the effect of converting pensions into annuities, which causes the retiree to lose uniform federal protections and significant protection from the Pension Benefit Guaranty Corporation.
In 2013, Verizon sold off 41,000 former management retirees to Prudential Insurance Company and many of those retirees are current New York residents. General Motors sold off 76,000 retirees pensions to Prudential Insurance.
Jack Cohen, a Yorktown Heights resident and executive vice president of the 128,000 member Association of BellTel Retirees said in a prepared statement: “I, too, was one of the 41,000 Verizon managers who had my pension moved to a Prudential group annuity contract.
"This arbitrary decision was made without giving us any rights over what was being done with our retirement funds. Retirees like myself, are counting on our retirement income to sustain us in the years we are the most financially vulnerable.”
“Retirees depend on their hard earned pensions and when companies go through the process of pension stripping, they are playing a risky game with a retirees’ pension," Avella said in a prepared statement. "By leaving affected retirees with virtually none of the longstanding federal pension protection mechanisms, companies are shifting the burden of risk onto pensioners. That is why it is necessary to provide protections to retirees whose pension plans have gone through pension de-risking. My legislation will put in place these protection mechanisms that retirees had before their pension plans were transferred.”