Article 43

Pension Ripoff

Posts in this section are about pension issues - especially the class action pension suit against AT&T.

Friday, May 12, 2023

Burned Boomers Part 9

A TIME investigation has concluded that long before today’s working Americans reach retirement age, policy decisions by Congress favoring corporate and special interests over workers will drive millions of older Americans - a majority of them women - into poverty, push millions more to the brink and turn retirement years into a time of need for everyone but the affluent.
- The Great Retirement Ripoff, 2005

The newest FEDERAL RESERVE REPORT on changes in family finances - looking at changes from 2001 to 2004 - highlight the decline in families with private retirement accounts for individuals… While the news is dominated by employers eliminating defined benefit pensions, the fraction of families with individual retirement accounts also fell 2.5 percentage points in those years… In fact, less than 50% of families have any kind of retirement account… The hard reality is that the decline in employer pension funds are mostly being replaced by....nothing.
- Declining Private Retirement Accounts, Labor Blog, 2006 Archive

“seventy-five percent of Americans nearing retirement age in 2010 had LESS THAN $30,000 in their retirement accounts.” How does this hurt younger workers? As it becomes more and more difficult to retire after busting ones ass in the American workforce for 40 years, an increasing number of older people have no choice but to remain in the workforce… WE SHOULD be increasing Social Security benefits, decreasing the out-of-pocket healthcare costs seniors have to shoulder, and lowering the minimum age for retirement.
- The Great Retirement Ripoff Sequel, 2013

Social Security is far more efficient and reliable than the other two legs of the RETIREMENT security stool - employer PENSIONS (both defined-benefit pensions and 401Ks) and tax-deferred private savings accounts like IRAs.
- Rethinking Social Security, 2013

Most U.S. companies no longer offer defined-benefit pensions, which typically provided guaranteed monthly payments to workers when they retired. But pension funds that still operate must gain in value to ensure they have enough to meet their obligations.
- The Great Retirement Ripoff Sequel 2, 2019

The social safety net for older Americans has been SHRINKING for the past couple decades. The risks associated with aging, reduced income, and increased healthcare costs, have been off-loaded onto older individuals. At the same time, older Americans are increasingly likely to file consumer bankruptcy, and their representation among those in bankruptcy has never been higher. Using data from the Consumer Bankruptcy Project, we find more than a two-fold increase in the rate at which older Americans (age 65 and over) file for bankruptcy and an almost five-fold increase in the percentage of older persons in the U.S. bankruptcy system. The magnitude of growth in older Americans in bankruptcy is so large that the broader trend of an aging U.S. population can explain only a small portion of the effect. In our data, older Americans report they are struggling with increased financial risks, namely inadequate income and unmanageable costs of healthcare, as they try to deal with reductions to their social safety net.
- Bankruptcy Is The New Retirement, 2018

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Nearly half of baby boomers have no retirement savings

By Daniel DeVise
The Hill
May 8, 2023

More than two-fifths of baby boomers are nearing retirement with no retirement savings.

That fact may surprise you if you are a typical white-collar worker, dwelling in a corporate culture of near-universal retirement coverage, encouraged to save a half-million dollars or more before taking the gold watch.

But many Americans work for smaller companies that don’t offer retirement savings, or are self-employed, or live paycheck to paycheck.

“You think everyone works for a Fortune 500 company, and everybody has a pension plan, but that’s not the reality,” said Craig Martin, managing director of wealth and lending intelligence at J.D. Power.

Fewer than half of working-age Americans have any retirement savings, ACCORDING TO CENSUS DATA FOR 2020. Savings rates rise with age, but only to a point. In the 55- to 64-year-old boomer age group, 58 percent of Americans own retirement accounts.

And that is a problem. A newly minted retiree of 65 can now expect to live 20 more years, on average, according to SOCIAL SECURITY PROJECTIONS.

Without a retirement account, most retirees count on Social Security. The average monthly Social Security check to a retired worker IS AROUND $1,800. The average household run by an American older than 65 spends MORE THAN $4,000 A MONTH.

Yet, “many people go into retirement thinking that Social Security is going to provide for them,” said Josh Hodges, chief customer officer for the National Council on Aging.

A chasm of wishful thinking separates America’s retirement goals from its retirement realities.

By one rule-of-thumb retirement calculator, workers should aim to save 10 times their annual salary by age 67: $375,000 for an individual, and $708,000 FOR A HOUSEHOLD, based on median incomes.

If the goal is to retire in relative comfort, Americans assume they will need something closer to $1.1 million, according to a SURVEY by Schroders, the asset management company.

But the average retirement account held just over $100,000 at the close of 2022, according to a Fidelity ANALYSIS.

The median baby boomer household isn’t doing much better, WITH $134,000 in retirement savings in 2019, the most recent federal data. Thats about one-third of the average retirement savings in that age group, $408,420, a figure inflated by the super-rich.

And most retirement nest eggs are much smaller now than a year ago. By Fidelity’s estimate, the average retirement account LOST ONE-FIFTH ITS VALUE in 2022, dwindling from $135,600 to $104,000.

“There were a lot of downsides in the last year,” said Courtney Alev, consumer financial advocate at Credit Karma. “It really shows why it’s really important for everyone, no matter how old you are, to have a diversified portfolio.”

Among retirees, the average savings account DWINDLED from $192,000 to $171,000 in 2022, according to a survey by Clever Real Estate. The share of retirees with no savings jumped from 30 percent to 37 percent.

Earlier generations of retirees counted on Social Security and employer-funded PENSIONS to deliver a steady income.

Social Security has dwindled as an income source over the years, and pensions are in decline. More than ever, Americans who desire a “comfortable” retirement must squirrel away money in a retirement account.

Yet nearly half of private-sector employees, 57 million Americans, have no option to save for retirement at work.

According to AN AARP ANALYSIS, huge swaths of the American public lack access to employer-sponsored retirement plans: 78 percent of workers at companies with fewer than 10 employees, 76 percent of workers who lack high school diplomas and 64 percent of the nation’s Hispanic employees.

“When you get below 100 employees, the likelihood of a plan really goes down,” said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute. “That leaves those people to try to do an IRA on their own. And if they’re lower income, they’re less likely to have a relationship with a financial institution to set that up, and they’re likely living paycheck to paycheck.”

Anyone can start a retirement plan. But for lower-income Americans, it is easier said than done.

Since the 1980s, inflation-adjusted wages have stagnated for all but the wealthiest Americans.

To make ends meet, more Americans are working into their 70s. The share of people older than 75 in the labor force is projected to reach 11 percent in 2026, up from 5 percent in 1996.

But even with those added wage-earning years, the poverty rate among seniors reached 10.3 percent in 2021, Census data shows, which is the highest quotient in two decades.

“If you didnt have Social Security, it would be well north of 40 percent,” said Richard Fiesta, executive director of the Alliance for Retired Americans.

The savings shortfall leaves many older people unprepared for the medical costs that come with old age.

More than half of Americans will eventually need long-term care. Someone who turns 65 today will incur $120,900 in future long-term care costs, on average, by one estimate.

But an analysis by the National Council on Aging found 60 percent of older adults could not afford two years of long-term, in-home care.

“People don’t want to admit they’re going to need it,” Hodges said. “The idea that you’re going to need help going to the bathroom, help getting out of bed, that’s a concept people don’t want to deal with.”

The good news, retirement experts say, is that an older American with insufficient retirement funds still has plenty of options.

One is to keep working.

“We are seeing a growing number of people at older ages who are in the workforce because they want to be,” said David John, senior strategic policy advisor at AARP. On top of making money, older workers might “want the social connections, to get out of the house, to do something that feels worthwhile.”

Additional years of work deliver another chance to build retirement savings, rather than deplete them.

Retirees might consider postponing Social Security benefits. You can claim them at age 62, but the monthly check ALMOST DOUBLES if you wait until 70, according to a federal analysis. The extra money “is a better deal than you can get pretty much anywhere else,” John said.

Homeowners should consider leveraging home equity to bridge gaps in retirement savings. Home equity makes up most of the typical retired homeowner’s net worth. But many seniors balk at the REVERSE MORTGAGE, a loan against home equity that yields tax-free income. The loan ends when the borrower dies, moves out or sells the property.

The reverse mortgage has a mixed reputation, but “there are good, reputable companies that can provide you a respectable amount of income,” Copeland said.

As a long-term policy fix, many retiree advocates point to a growing list of states that offer universal retirement savings.

More than a dozen states have adopted retirement-savings plans for workers at companies that don’t offer them. Many other states are considering “auto-IRA” programs. The ultimate goal, advocates say, is to reach all 57 million Americans who can’t save for retirement at work.

SOURCE

Posted by Elvis on 05/12/23 •
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Wednesday, May 03, 2023

AT&T Pension News - Derisking

Congress’s role has been pivotal. Lawmakers wrote bankruptcy regulations to allow corporations to scrap the health insurance they promised employees who retired early - sometimes voluntarily, quite often not. They wrote pension rules that encouraged corporations to underfund their retirement plans or switch to plans less favorable to employees. They denied workers the right to sue to enforce retirement promises. They have refused to overhaul Americas health-care system, which has created the world’s most expensive medical care without any comparable benefit. One by one, lawmakers have undermined or destroyed policies that once afforded at least the possibility of a livable existence to many seniors, while at the same time encouraging corporations to repudiate lifetime-benefit agreements. All this under the guise of ensuring workers that they are in charge of their own destiny - such as it is.
- The Great Retirement Ripoff, 2005

In the 35 years since Ronald Reagan was President nothing has been done to improve the lives of workers in the nation. Indeed, everything possible has been done by the wealthy class and their flunky politicians to reduce workers wages and benefits and to destroy their labor unions and saddle them with debts that can never be paid down.
- The Broken Social Contract, 2016

Whether America is facing a retirement CRISIS in which seniors are making do with shrinking financial resources has been widely debated. But heres a telling metric: Seniors are making a larger share of bankruptcy filings.

During that same period, a sizable percentage of American workers were covered by corporate defined-benefit pensions, producing what retirement experts have called “a brief golden age when many American workers could retire with confidence. “
- Bankruptcy Is The New Retirement, 2018

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According to this BLURB:

May 1, 2023

AT&T Inc., Dallas, announced an agreement to purchase group annuity contracts from two Athene Holding subsidiaries to transfer $8.1 billion in U.S. pension plan liabilities.

The company is completing the purchase, which is expected to close Wednesday, from Athene Annuity & Life Co. and Athene Annuity & Life Assurance Co. of New York, according to a 10-Q filing with the SEC on Monday.

AT&T is purchasing the contracts with plan assets and will not be required to make any further contributions to the plan. In August, the insurers will take on the responsibility for paying benefits to about 96,000 AT&T participants and beneficiaries, according to the filing.

As of Dec. 31, AT&T had $40.87 billion in U.S. pension plan assets, and $42.83 billion in projected benefit obligations, for a funding ratio of 95.4%, according to its most recent 10-K filing.

An old buddy at AT&T got this letter today:

Dear AT&T retiree,

As a retiree, you’re probably aware that AT&T is focused on becoming the nation’s leading 5G and broadband provider. This focus is consistent with our legacy as one of the world’s leading communications providers, a legacy you supported with your service to the company. In recognition of that service, the leadership team is committed to preserving the most important and significant benefits to our retirees, despite an increasingly challenging and competitive environment.

For decades, we’ve worked hard to safeguard and fully fund our pension obligations. With the plan in good standing, we’re looking at options to further care for these important assets and give you greater peace of mind about your pension payment.

One option available today is to work with a respected financial institution that provides pension funds for other Fortune 100 companies. These financial institutions are experts in this field, with a central focus on managing pension assets for maximum returns and safety.

For this reason, and after a detailed review, we’ve elected to transfer the assets and liabilities associated with your pension to an expert in this field, Athene.

Athene is a highly-rated insurance company that manages annuity payments as part of their core business. They’re experts in what they do, and they do it well. For AT&T, this model is more cost effective and will simplify the administration.

What does that mean for you? Beginning with your August pension payment, you’ll receive monthly payments from Athene instead of the AT&T Pension Benefit Plan. This change does not affect the amount of your monthly pension payment. Your monthly payment will be in the same amount and generally paid under the same terms as the benefit you currently receive.

You don’t need to take any action right now. In July, Athene will send you a welcome kit and will ask you to review your personal information. They’ll provide instructions on how to make any changes, if needed.

We know that the AT&T Pension Benefit Plan provides an important source of retirement income for thousands of individuals, and you can have confidence that this move is a win-win. You’ll be supported in your retirement by an expert in the field, as AT&T focuses on being the best connectivity provider.

We’ve included a brief Q&A below to help answer some of your questions. You can also visit go.att.com/pensiontransfer for more information. If you have any further questions right now, please contact the Fidelity Service Center at 1-866-956-3115. Athene will be in touch with you in July.

Thank you for all you’ve done for AT&T.

AT&T Benefits

This brings back memories of 20 years ago. The company switched to a BALANCE TRANSFER PLAN, that shrunk whatever pension we though we were gonna get at 65, and a 12 year LAWSUIT to TRY TO STOP THEM from screwing us. The SUPREME COURT turned down the case AFTER APPEAL, and that was it. WE LOST.

This new thing they’re pulling is called “derisking.”

The DE-RISKING of defined benefit (DB) pension funds is a global trend. The increasing volatility of global capital markets is bringing this trend to the forefront in Canada and the United States, where many DB pension plans have solvency deficiencies. More and more, shareholders are demanding to know what steps companies are taking to manage pension risk.

DERISKING is a result of company plan sponsors methodically discontinuing cost of living allowances (COLA), freezing out new entrants and offering 401Ks or IRA plans, lowering investment risk of trust assets, offering lump sum payments, and voluntarily terminating pension plans permitted by ERISA. Plan terminations caused by a plan sponsor bankruptcy, or outright PBGC plan takeovers are distress terminations (not voluntary), de-risking is not the direct cause of distress terminations.

While ERISA permits companies to execute a partial or a total voluntary termination of defined benefit pension plans to annuities through third-party insurance companies, there is an increasing risk that insurers of annuities could fail, sell, or transfer assets and liabilities associated with the annuities to yet another insurer, that may not be certified.

Why can’t we just lobby to stop voluntary terminations? Courts have upheld that plan participants are entitled only to the value of their vested pension plan benefit. While we support an ERISA overhaul, for now our goal is to protect annuities!

Corporate America and the politicians in its pockets will no doubt get away with moving more money from the WORKING CLASS to THEMSELVES.

God help the next generation of AT&T retirees.

AT&T’s Pension Plan Action Impacting 96,000 Plan Participants

On Wednesday, May 3, TelCo Vice Presidents Jane Banfield and Ted Mazzella, TelCo Benefits Advisor, and Joann Alix-Gagain, President, Southern New England Telephone (SNET) Retirees Association, and I had a conference call with Julianne Galloway, AT&T Vice President Global Benefits. During the call it was learned a deal worth approximately $7.7 billion had just closed to move 96,000 AT&T pension plan participants, from the AT&T pension plan to annuities from Athene Life & Annuity Company and Athene Annuity & Life Assurance Company.

The AT&T pension plan participants to be impacted by this transfer to annuities are those whose pension is generally less than $2,200 per month. The payment will be the same from the annuity.

Ms. Galloway said the transition for annuities will be effective starting in August of this year with the first payouts beginning around the first of September. The transaction had been negotiated for AT&T by State Street Global Advisors. It is the same firm that acted as the independent fiduciary for IBM in September 2022 to transfer $16 billion in U.S. defined benefit plan liabilities for 100,000 pension plan participants.

In a conversation I had with NRLN President Bill Kadereit on Tuesday, he suggested I ask during our conference call:

-- whether the AT&T Pension Trust Fund would be funded at the same level it was at prior to its action with the annuity companies?

-- did the deal include purchase of reinsurance that is sufficient to provide a replacement annuity of equal value from a third-party insurer that is independent of the annuity provider and financially capable?

The good news is that Ms. Galloway said that the AT&T Pension Trust Fund would be funded at the same level following the transaction.

The bad news is that reinsurance was not included in the agreement. I said to Ms. Galloway, “that leaves the entire risk on the backs of the retirees.”

Ms. Galloway’s response was that the states have financial oversight of the insurance company that would mitigate the risks. I told her I was not at all trusting of the states to oversee Athene in light of what has happened with federal oversight of the recently failed Silicon Valley Bank, First Republic and Signature Bank plus who knows what others are on the failure block.

Should an insurer that provides annuities fail and there is no reinsurance, the maximum coverage by the STATE GUARANTY ASSOCIATIONS varies widely by state. Most states guarantee up to $250,000 per person per lifetime, although limits range from $100,000 in New Jersey to $500,000 in New York. Depending upon our financial needs and how long we live, our pension could be gone in 10 years.

Our group was told details of the transition plan would be provided soon to the 96,000 impacted and a call center will be established for the transitioning retirees. Athene is expected to send a welcoming kit to all affected retirees by July and AT&T will have a website available to assist and answer questions.

I caution the readers of this message that what I captured in my notes during the conference call might not be absolute.

I urge you read the following message from Bill Kadereit to know that actions similar to AT&T’s are being done regularly by pension plan sponsors and understand the federal legislation the NRLN is lobbying for to better protect pension plan participants impacted by the shift from pension to annuity.

Monte Baggs, President
TelCo Retirees Association

AT&T Pension Plan to Athene - Monte Baggs, TELCO RETIREES President, and BILL KADEREIT, NRLN President:

AT&T’s Pension Plan “De-risking”

NRLN Is Lobbying for Legislation to Protect Pension Plan Participants

The action that AT&T has taken is known as pension plan “de-risking”, the removal of participants of a pension plan through the purchase of an insurance company annuity. While de-risking causes pension plan participants to lose the protection of the Employee Retirement Income Security Act (ERISA) and the Pension Benefit Guaranty Corporation, it is currently allowed under ERISA.

It is disappointing that AT&T chose not to purchase reinsurance to protect its 96,000 pension plan participants should Athene fail. The largest “de-risking” that has happened in the U.S. was in 2012 when General Motor’s transferred $29 billion to Prudential for annuities to replace its salaried pension plan. GM did not purchase reinsurance, but they at least required that Prudential maintain a separate sub-account for GM assets transferred which provided GM retirees with added security.

Reinsurance is a key element of the NRLN’s proposed solution and draft statute we are lobbying for with Congressional leaders to protect pension plan participants when “de-risking” happens. The NRLN has teamed with the Pension Rights Center (PRC) to gain legislation that requires parties for an annuitization to reinsure annuities. This would be a legally binding agreement to follow the assets and therefore would apply to successor firms. This would protect plan participants. It would apply to all defined benefit pension plans under ERISA.

We are comparing the 2012 with 2022 pension plan financials for all NRLN organizations. Monte sent me AT&T’s latest 2022 plan-year Annual Funding Notice (AFN) requesting quick service. Total plan participants were 411,165, down 68% from 602,000 in 2012, Those active (on-roll) dropped to 120,000 reflecting in part the mergers of CenturyLink, Quest and Embark plan participants - the 2023 annuitization of 96,000 will reduce total participants to about 315,000. To measure performance the NRLN focuses on three funding measurements: (a) the more conservative Pension Protection Act of 2006 (PPA) view of interest rates - AT&T’s 2023 AFN for the 2022 plan year shows a 70% PPA funding level, down 13.3% from 83.3% in 2012 on a net asset basis, but on a total asset basis PPA funding was 83.4%, down just 2.6% from 2012, (b) Fair Market Value (FMV) basis or market values of assets vs liabilities on 12-31 of the plan year - AT&T’s AFN reported 94.7% for 2022, up 17.7% from 2012; and (c) we calculate an estimate of what the PBGC would value the plan applying a conservative annuity market interest rate to discount liabilities - this would be 79% for 2022, up 14.9% from 2012.

Considering the PPA 83.5% (total asset basis), FMV 94.7% and PBGC 79%, what should we believe? On 12-31-2022 we can approximate funding of 85% plus but… we have several questions about liability discount rates applied. AT&Ts plan asset portfolio includes 17% in domestic and 5% in foreign equities, 15% in real estate, and 27% in “Alternative Investments” - downside risk?.

We will update Monte and you and lobby to get our reinsurance proposal passed by Congress.

Bill Kadereit, President
National Retiree Legislative Network

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As insurance companies take over pension plans, are your payments at risk?

By Gretchen Morgenson
NBC News
June 14, 2020

As insurance companies take over corporate pensions, advocates are concerned about risks to retirees.

How safe is your pension? As COVID-19 shutdowns hobble the U.S. economy, the question has taken on more urgency.

While risks associated with underfunded pensions for state and local government employees have been known for years, a new concern has arisen, pension rights advocates say. It centers on the growing trend of insurance companies taking over pensions for employees of private companies.

“This is what we’ve worried about - when companies sell off their pension plans,” said Karen Friedman, policy director at the Pension Rights Center, a nonprofit focusing on workers retirement security. “Is it safe to transfer money out of pension plans insured by the [government-backed] Pension Benefit Guaranty Corporation to insurance companies where the protections for consumers are scant?”

Pension obligations are costly and companies have been eager to jettison them in recent years. Insurers have been happy to take on their assets - such deals have totaled $110 billion since early 2015.

But pensions taken over by private insurers are not protected from default by the government-backed PBGC, which protects the pensions of most private company employees. In addition, insurers are regulated by the states, not the federal government, and some are now affiliated with private equity firms, whose focus is often on short-term profits which can conflict with insurers’ long-term obligations.

Insurance company Athene Holding, a relative newcomer to the arena, has vaulted to the number-two position in pension buyouts. Created in 2009, Athene is affiliated with Apollo Global Management, the publicly traded private equity giant co-founded by billionaire Leon Black. Athene, whose stock trades publicly, is Apollo’s biggest investment. Apollo has $330 billion in assets under management, with over $100 billion related to Athene, its filings show. The insurer pays significant fees to Apollo each year - Athene’s investment management fees to Apollo accounted for 27 percent of Apollo’s total such fees in 2019.

Athene has acquired $12 billion in corporate pension obligations recently, including those of Bristol-Myers Squibb, Dana Corp. and Lockheed Martin Corp. Today, roughly 178,000 people rely on Athene for pension benefits, the company says. The entity taking most of the obligations is Athene Annuity & Life Co.

Athene Holding has performed well, but in the first quarter of 2020, it reported a $1.1 billion loss, in part reflecting financial market turmoil. Some $300 million of that loss came from Athene’s 7 percent stake in Apollo.

Financial markets have recovered since March 31, shoring up Athene’s Apollo holding.

Still, the loss raises questions about risks in Athene’s investments.

Researchers at the Federal Reserve Board PUBLISHED A PAPER in February warning of risks among a handful of insurers that are structured like Athene. The study, which cited Athene as an example, concluded, “Life insurers have become more vulnerable to an aggregate shock to the corporate sector.”

Joseph M. Belth, professor emeritus of insurance at Indiana University and a longtime authority on the industry, told NBC News that he thinks private equity firms like Apollo are not well-suited to partner with insurance companies.

“I think private equity firms are in it for the quick buck and that is what troubles me,” Belth said. “Policyholders are pawns in the hands of people like Black.”

Asked to respond, Joanna Rose, a spokeswoman for Apollo and Black said in a statement that Athene’s and Apollo’s interests are closely aligned. “Athene was founded with long-term capital from blue-chip insurance investors, not from a private equity fund,” she said. “Athene does not invest in Apoll’s flagship PE funds, nor does it lend to Apollos PE portfolio companies.”

Athene’s spokeswoman, Karen Lynn, said in a statement: “Athene strongly disagrees with various characterizations of our business asserted in this article. We are highly rated, disciplined and financially strong as one of the best-capitalized businesses in the financial sector.”

About 8.6 MILLION Americans over 65 are receiving pension payments from a private company plan, and millions more who are still working are paying into private plans. Most of those plans are insured through the government-backed Pension Benefit Guaranty Corporation. PBGC says it protects around 40 million workers in 23,400 pension plans.

When a company defaults on its pension obligations, PBGC pays the pension, in most cases. Some 84 percent of participants in private company plans taken over by the PBGC received all their vested benefits, a 2019 study showed. The remaining 16 percent saw their benefits fall by an average 24 percent. As of 2019, PBGC has assumed the pension obligations of almost 5,000 plans and more than 900,000 retirees.

When private insurance companies take over pension plans, they typically offer participants a group annuity that pays the same amount as the private plan. An annuity is an insurance contract that can provide lifetime monthly income. The U.S. Department of Labor, which oversees enforcement of pension rules, has not objected to these takeovers.

However, those pensions are no longer backed by the PBGC. They are backed by the insurers, which must be disclosed when the transfer takes place.

Insurers are not regulated by the federal government. That task falls to each state in which the companies do business.

ATHENE HOLDING is based in Bermuda, while its unit Athene Annuity & Life Co. is in Iowa. In April, the New York insurance overseer accused Athene Holding of failing to register its pension takeover business there. Athene Holding paid $45 million to settle the matter, neither admitting nor denying the allegations.

State insurance regulators require insurers to file annual reports detailing their investment portfolios and the assets they have to cover policyholders’ claims. The key figure - surplus - is the difference between an insurers’ assets and liabilities. The bigger the cushion, the better.

Athene Annuity & Life, the insurer backing most of the pension obligations, has $54 billion in assets, filings show. And a $1.2 billion surplus - which is roughly $1 billion above the level at which the regulator overseeing the company would have to move in to protect policyholders.

If an insurance company gets into trouble, its assets are sold to pay policyholders; claims. If insufficient, policyholders must rely on STATE GUARANTY funds financed voluntarily by other insurers. Unlike the Federal Deposit Insurance Corporation, which has a pre-funded insurance pool protecting depositors against bank failures, state guaranty funds raise money only after a failure occurs.

STATES IMPOSE LIMITS ON HOW MUCH POLICYHOLDERS CAN RECEIVE IN A FAILURE. In Alabama, Colorado and Iowa for example, the most annuity holders can receive is $250,000.

When Athene Annuity & Life takes over a pension, it receives assets backing those obligations from the company that formerly ran it. Athene sends 80 percent of those assets and liabilities to an affiliated reinsurer in Bermuda, the company’s filings say, and keeps the remaining 20 percent in U.S. entities.

THOMAS GOBER, a certified fraud examiner in Virginia who analyzes insurance companies and has worked as a consultant to and witness for the U.S. Department of Justice, questioned Athene;s heavy reliance on related companies to reinsure or backstop its policyholder obligations.

“A strong group of independent, well-capitalized reinsurers can strengthen an insurer’s financial backbone,” said Gober.

In a typical reinsurance or coinsurance arrangement, an insurer will pay an unrelated company to provide a backstop to cover the initial insurer’s obligations if necessary. Under such an arrangement, the initial and secondary insurers share profits and losses based on a preset ratio.

Athene Annuity & Life’s most recent regulatory filings show 95 percent of its reinsurance and coinsurance deals were with affiliates - $54 billion of $57 billion. “This defeats the purpose of a backstop,” Gober said. New York Life Insurance Co., which carries the highest ratings from Moody’s and Standard & Poors, has zero reinsurance or coinsurance deals with affiliates.

One affiliated reinsurer is Athene Re USA IV, which provided a $1.4 billion backstop to Athene Annuity & Life as of 2019. The reinsurer’s risk-based capital falls well below mandatory levels, under National Association of Insurance Commissioners’ rules, filings show. That’s because one of the assets it uses to compute its capital - letters of credit for $137 million - is not admitted per the NAIC. |Its rules don’t allow letters of credit as assets because they represent the risk of a bank, not the insurance company,” said David Provost, deputy commissioner of the captive insurance division of the Vermont department of regulation.

Vermont regulators, where Athene Re is domiciled, did allow the letters of credit to be included as an asset. “We are making a regulatory judgment that this is acceptable,” said Provost. He did not disclose the identity of the banks backing them.

Karen Lynn, a spokeswoman for Athene, said its Bermuda-based reinsurers are strong and have capital “consistent with a AA-rated company.” (An AA rating is considered high quality; AAA is the highest.)

But outsiders can’t analyze the reinsurers’ books because Bermuda doesn’t require extensive public disclosures. Athene’s annual Bermuda filings consist of 5 pages and few details, versus the Iowa subsidiarys over 1,000-page annual state filing. “And policyholders can typically collect only from the insurer that wrote their policies, which is why the $1.2 billion in surplus held by Athene Annuity & Life Co. should be the focus,” according to Gober.

Policyholders who are unfortunate enough to get caught up in an insurance company failure face another challenge: litigation can drag on for decades. In January 2020, for example, a federal appeals court ruled on a case involving money owed on an annuity written by Executive Life. That company failed in 1991.

After Executive Life collapsed, many of the insurer’s assets were picked up at significant discounts by Black’s firm, Apollo.

The relationship between Apollo and Athene, the subsidiary that backs pensions, is “special and symbiotic,Ҕ Black told investors in March.

For Apollo, the arrangement is lucrative. Over the past three years, Athene has paid Apollo $1 billion in management fees.

For Thomas Gober, however, the relationship between the companies is problematic. There is nothing illegal about Athene’s practices, but Gober sees problems with the company’s relatively thin surplus, the quality of Athene’s investments, and the habit of Athene of investing in Apollo-related entities. Apollo owns 35 percent of Athene, and Athene owns seven percent of Apollo.

The Federal Reserve researchers also expressed concerns, concluding that private-equity backed insurers may test the ability “of the insurance industry, and the financial system more broadly” to withstand “direct and indirect shocks to the corporate sector.”

The Athene spokeswoman said the Fed report did not provide “comprehensive insight into how we manage our business. We have maintained, and will continue to maintain, very strong liquidity within our diversified investment portfolio, and we take great care to invest behind predictable, surrender charge protected, long-dated policyholder obligations.”

In a corporate pension buyout, a company, say <a href+"https://www.businessrecord.com/athene-annuities-to-cover-bristol-myers-squibb-pension-payouts/" rel="nofollow">BRISTOL-MEYERS</a>, hands its pension assets and obligations over to Athene. To meet these obligations, insurers typically invest policyholders’ money in corporate bonds, government obligations, and mortgages.

With Apollo guiding Athenes portfolio, the insurer has invested heavily in Apollo-related entities, regulatory filings show. Athene Annuity & Life holds $4.1 billion in stocks, bonds and mortgage loans of its “parent, subsidiaries and affiliates,” up from $172 million in 2015.

“Compared with the insurerҒs surplus of $1.2 billion, this is a troubling concentration of assets,” said Gober.

“Thats too many eggs in one basket and an affiliated basket,” he said. “If the insurer gets into trouble, the question would be whether the affiliates’ bonds would be collectible because the affiliates are so dependent upon the insurer for revenues.”

By comparison, Prudential Annuities Life Assurance Corp. has total assets of $54 billion and surplus of $6.4 billion - roughly the same assets as Athene but five times the surplus. Its investments in parent, subsidiaries and affiliates total just $231 million.

NBC News asked Lynn, the Athene spokeswoman, how its policyholders can be sure these investments are good for them and not just good for Apollo affiliates. “Because Apollo owns 35 percent of Athene,” she said it is “completely aligned with all Athene stakeholders to find the highest quality risk-return assets for AtheneҒs balance sheet as possible.” She also said Athene’s investment in Apollo shares would not be used to pay insurance policyholders’ claims, including pension benefits.

Bill Wheeler, Athene’s president, said in a statement: :The premise of your story contains the assertion that an affiliation with Apollo means more risk. This is clearly untrue.” Moreover, all of its pension takeovers “have been vetted and selected by plan fiduciaries and committees whose sole responsibility is to consider the interest of participants and beneficiaries.”

Asked how Athene shareholders and policyholders can assess whether amounts paid in investment management fees to Apollo are fair, Lynn said Athenes relationship with Apollo has fueled the insurer’s high performance in recent years.

To manage the conflicts of interest arising from Athene’s ties to Apollo, Lynn said the company’s board has a committee that approves the deals. The transactions are also vetted by disinterested directors at Athene, with both groups advised by independent legal and financial advisers.

The conflicts committee “is comprised solely of directors who are independent of Apollo,” she said.

But the Athene proxy filings show all three conflicts committee members are or were directors of Apollo affiliates, including Apollo Residential Mortgage Inc., Apollo Tactical Income Fund and Apollo Commercial Real Estate Finance, Inc.

Asked about these affiliations, Lynn said Athene’s governance practices adhere to requirements set out by the New York Stock Exchange, where its shares trade. Athene declined to make the directors available.

While corporate bonds dominate Athene’s investments, it is also a big buyer of commercial mortgages and securities that bundle debt together, known as COLLATERALIZED LOAN OBLIGATIONS. The company also holds securities backed by aircraft leases, retailers, oil companies, car rental companies and hotels, all hurt by COVID-19 closures.

Gober studied thousands of pages in regulatory filings of Athene’s major subsidiaries comparing risks in their investments with the cushion the companies have to pay policyholder claims - the surplus.

“The biggest problem with the investment portfolio is it is high risk and illiquid,” Gober told NBC News. “Given how thin their surplus margins are, its relevant to compare how much more they have in risky stuff.”

Lynn disputed the view that the company’s policyholders face risks. “There is absolutely no evidence to suggest that any of our subsidiaries are inadequately capitalized,” she said, “when considering the strength and accessibility of capital across our consolidated business. Athene has more than $12 billion of consolidated statutory capital supporting $112 billion of policyholder reserves, reflecting a ratio which is meaningfully higher than other A+ and AA- rated insurers, as well as other fixed annuity providers.”

“The quality of Athene’s investments raises questions as well,” said Gober. Its most recent filings show more than one-quarter of the securities it intends to sell before they mature were either nonrated or rated below investment grade by agencies such as Moodys Investors Service and Standard & PoorҒs.

Asked whether policyholders should be concerned about these holdings, Athene says it prefers to use the ratings method put forward by NAIC. Under this system, only 5.7 percent of the securities are rated below investment grade, its filings say.

Athenes filings also warn that “many of our invested assets are relatively illiquid,: meaning potentially difficult to sell. The company relies on Apollo for risk management support, its filings say.

About the author: Gretchen Morgenson is the senior financial reporter for the NBC News Investigative Unit. A former stockbroker, she won the Pulitzer Prize in 2002 for her “trenchant and incisive” reporting on Wall Street. Lisa Cavazuti contributed.

SOURCE

Posted by Elvis on 05/03/23 •
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Friday, March 17, 2023

France Rams Pension Reforms Without Vote

While cities across France remain on the edge, President Emmanuel Macron holds on to his defiant position on the pension reform. In an interview, the French President vowed to push through the contentious reform despite uproar, saying that he was prepared to accept ‘unpopularity’. On Monday, the French government narrowly survived a no-confidence motion. However, the protests across France are only intensifying. In Paris, students and university staff hit the streets. French port and dock workers launched ‘Dead Ports’ day to oppose the reform. The Macron government is facing its biggest domestic challenge of its second term. Watch THIS VIDEO for details.

French anger spreads after Macron forces pension age rise
Strikes escalate and MPs call for protection as interior minister warns protesters against wreaking havoc

By Angelique Chrisafis
The Guardian
March 17, 2023

Refinery strikes have escalated in France as the interior minister spoke of protesters wreaking havoc across the country and some MPs called for police protection, amid anger at the government pushing through a RISE IN THE PENSION AGE without a parliamentary vote.

More than 300 people were arrested across France overnight during spontaneous protests against Emmanuel Macron’s decision to bypass parliament and FORCE THROUGH his unpopular pensions changes, including raising the eligible age from 62 to 64.

Macron instructed the prime minister, lisabeth Borne, to invoke article 49.3 of the constitution, which allows the government to adopt a bill without a parliamentary vote, because he said there was too much economic risk to the country if MPs voted against the bill.

As opposition politicians accused the government of a brutal and undemocratic approach, demonstrators gathered in Paris and other cities. About 200 protesters briefly blocked traffic on the Paris ring road early on Friday morning.

In the energy sector, strikers voted to halt production at one of the country’s largest refineries by this weekend or Monday at the latest, a representative of the CGT union said. Workers had already been on a rolling strike at the northern site TotalEnergies de Normandie, but halting production would escalate the industrial action and spark fears of fuel shortages. Strikers continued to deliver less fuel than normal from several other sites.

A bin collectors’ strike in Paris also continued, as thousands of tonnes of waste piled up in streets across half of the city. A further day of coordinated strike action by transport workers and teachers will take place next Thursday. Some teachers unions suggested supervisors should also strike early next week when high school students begin baccalaureat exams.

The interior minister, Gҩrald Darmanin, warned against what he called the chaos of random, spontaneous street demonstrations. Amid protests in cities from Rennes to Marseille, 310 people were arrested overnight, including 258 in Paris, he told RTL radio.

“The opposition is legitimate, the protests are legitimate, but wreaking havoc is not,” Darmanin said. He complained of “very difficult demonstrations” and denounced the fact that effigies of Macron, Borne and other ministers were burned at a protest in Dijon. He said public buildings had been targeted.

Late on Thursday night in Paris, some people started fires on side streets and caused damage to shop fronts after police used teargas and water cannon to clear hundreds of protesters who had gathered as a fire was lit in the centre of Place de la Concorde. By 11.30pm, 217 people had been arrested on suspicion of seeking to cause damage, Paris police said.

The head of Macrons centrist Renaissance party in parliament, Aurore Berg, wrote to Darmanin asking him to ensure the protection of MPs who feared violence against them. She said she would not accept “MPs living in fear of reprisals”. The interior minister replied to say police would be vigilant against any violence directed towards lawmakers.

Macron’s PLAN to raise the retirement age from 62 to 64 was passed by the surprise, last-minute use of a special constitutional power after two months of coordinated nationwide strikes and some of the biggest PROTESTS in decades. The government took the decision after it feared it could not secure a majority of MPs to vote in favour.

Unions immediately called for another day of mass strikes and protests for next Thursday, calling the governments move “a complete denial of democracy”.

Opposition parties will call a vote of no-confidence in the government on Monday. For this to pass, it would require large numbers of MPs from the rightwing party Les Rpublicains to back it. The party has said it will not do so, and the government has so far survived all attempted no-confidence votes in recent months.

Macron was severely undermined in the national assembly after his centrist grouping failed to win an absolute majority in parliamentary elections last June amid major gains for the far right and radical left.

Without a majority, Macron needed to rely on lawmakers from Les Republicains to back his pensions changes. But despite weeks of negotiations with Borne, the numbers did not add up, and the president decided not to risk a vote.

SOURCE

Posted by Elvis on 03/17/23 •
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Friday, December 25, 2020

AT&T Cuts Retiree Pension and Healthcare

image: retirement

AT&T Cuts Retiree Pension and Healthcare

Techstaffer
December 18, 2020

As a recruiter I’m often asked about benefit packages offered by certain companies. Over the last year there have been substantive changes in benefits coming from Fortune 500 companies with most of the changes going the wrong way. We’ve seen many large corporations choose to cut employee benefits whether that be pension, 401(k), or healthcare. VERIZON created headlines all the way back in 2005 when they announced they would freeze their pension program. In the years to come many corporations followed suite by moving to defined contribution plans as opposed to defined benefit plans. This trend culminated in General Electric deciding to freeze the largest pension fund in the United States. Other corporations have decided to target 401(k) plans. ExxonMobil announced earlier this year that they would suspend their 401(k) matching program indefinitely. Which brings us to AT&T

A surprise announcement was made on Monday where AT&T stated in a Memo that they will be reducing benefits in 2021 and 2022. I wanted to make sure my AT&T clients were informed about what exactly is going away.

AT&T CEO John Stankey has expressed a goal of $10 billion in cost cuts and the company has made it clear that workers benefits are next on the chopping block.

So who will be affected by these cuts? Employees retiring after 2022 will be hit the hardest, as they will lose all medical coverage typically given to retirees. AT&T will no longer supplement monthly premiums for medical or dental. This may not affect all employees. You should call the benefit office to inquire about your particular situation.

This announcement comes on the heels of AT&T alerting employees that they will no longer offer a Healthcare reimbursement account for those who retired after January 1st 2021. Currently things like out of pocket costs, supplemental coverage, and incremental coverage are covered by a healthcare reimbursement account from AT&T. According to AT&T’s Summary Plan description the HRA credit is worth $2,700 for an employee and $1,500 for an eligible dependent. If an employee takes full advantage of this benefit this would be worth $4,200 per year. Over a 20 year period this could save an employee and their family about $84,000.

AT&T pension benefits are being reduced as well. AT&T uses a Career Average Minimum (CAM) or a Pension Band Minimum (PBM) formula to calculate your pension contributions. Your CAM benefit is determined by multiplying your career pension compensation by a percentage and then dividing by 12. Currently that percentage is 1.6%. After January 1st 2022 that percentage will drop to 1%.

Management employees may receive a benefit based on the PBM formula. The PBM benefit is determined by multiplying a percentage by your pension compensation. Currently that percentage is 1.2%. After January 1st 2022 that percentage will be reduced to 0.75%.

AT&T is not the only company to cut benefits during the pandemic. History shows time and time again that when a recession hits corporations will decrease or suspend benefits. We witnessed this in the 2001 recession when General Motors, Charles Schwab, Goodyear Tire & Rubber, & Ford all decreased or suspended their company match programs. The same happened in 2008, with Forbes reporting that nearly 20% of companies with over 1,000 employees reduced or SUSPENDED 401(k) contributions. Unfortunately, that trend seems to be continuing in the wake of the current recession brought on by the Coronavirus pandemic. According to CNBC, 8% OF EMPLOYEES HAVE REDUCED OR SUSPENDED 401(k) CONTRIBUTIONS THIS YEAR ALONE. Major companies like Amtrak, Marriott Vacations Worldwide, and ExxonMobil have all suspended their 401(k) matching programs. In ExxonMobil’s case employees lost a company match of up to 7%, severely hindering an employee’s ability to save for retirement. AT&T’s cuts will also make it significantly more challenging for retirees to make their money last as long as they need.

Questions you need to ask yourself now on the risks of leaving and potential risks of staying at AT&T

Should I consider retiring now to lock in my company subsidy and look for another job outside of AT&T?

Are their jobs in my specialty available if I do leave?

Will my pension grow if I do stay?

Will my lump sum pension decrease If interest rates go up next year?

Would it be better to leave now with the healthcare subsidy and work a 20-hour per week job or would I do better if I stay and hope I do not get laid off?

Should I look for a contracting job in winter or wait until next year?

It is my hope that by being aware of these cuts and questions you can ask yourself can plan accordingly and make sound financial decisions going forward.

SOURCE

Links:

Santone, Angela. “AT&T: Updates to Your Retirement Benefits.” AT&T Memo, AT&T Inc., 15 Dec. 2020

“The Retirement/Transition Guide for AT&T Employees.” The Retirement Group, The Retirement Group, 11 Aug. 2020, https://telecom.theretirementgroup.com/att-guide-download-google

AT&T Nonbargained Summary Plan Description, 2020

Posted by Elvis on 12/25/20 •
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Friday, January 03, 2020

Retirement Ripoff Sequel 2

image: retirement

‘It’s really over’: Corporate pensions head for extinction as nature of retirement plans changes

By Nathan Bomey
December 10, 2019
USA Today

The practice of companies sending monthly retirement checks to their former workers is headed for extinction, and remaining pension funds are in tough financial shape.

Nearly two-thirds of pension funds are considering dropping guaranteed benefits to new workers within the next five years, according to a human resources consulting firm that studied the matter.

Despite gains in the stock market this year, U.S. pension plans are near their worst financial state in two years, according to the new report by Mercer, which casts a spotlight on the escalating cost of past promises to employees.

Most U.S. companies no longer offer defined-benefit pensions, which typically provided guaranteed monthly payments to workers when they retired. But pension funds that still operate must gain in value to ensure they have enough to meet their obligations.

By late 2019, the average pension fund had 85% of the funds necessary to meet its obligations over time due largely to low interest rates, according to Mercer’s 2020 Defined Benefit Outlook.

The firm also reported that 63% of companies with defined-benefit pensions “are considering termination” of the plan within half a decade. That would mean the pensions would be closed off to future participants.

The report comes as corporate pensions continue to disappear.

General Electric announced in October that it would offer lump-sum pension buyouts to about 100,000 former U.S. employees who have not yet begun receiving their pensions.

The company, which has been facing pressure to bolster its finances, also announced plans to freeze pension benefits for about 20,700 salaried pensioners at current levels.

“In the bigger picture, GE is just going the way that most of the private sector in the United States has gone,” Alicia Munnell, director of the Center for Retirement Research at Boston College, said in a recent interview. “Its really over in the private sector. The question is, just when does the last plan close down?”

The number of pension plans offering defined benefits - which means the payouts are guaranteed plummeted by about 73% from 1986 to 2016, according to the Department of Labor’s Employee Benefits Security Administration.

That’s due to a mix of reasons, including risk, costs, declining union power and the rise of 401(k)-style defined-contribution plans, which require workers to kick in their own funds for retirement investments, often with a company match.

SOURCE

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image: 401k bomb

Opinion: Recent surveys show sharp decline in retirement wealth for typical household

By Alicia H. Munnell
MarketWatch
January 2, 2020

In preparation for a recent presentation, I asked for data to documentthe increasing dependence on 401(k)s as opposed to traditional defined-benefit plans. One of the figures included total retirement wealth for households in the middle of the wealth distribution for five different cohorts.

I was stunned to see that retirement wealth, measured in 2016 dollars, had declined. That is, the wealth holdings for the late boomers (age 51 to 57) were actually lower than the wealth holdings for the mid boomers (age 57 to 63) at the same age .

Retirement wealth, which comes from the Health and Retirement Study (HRS), includes:

1) Social Security;

2) employer-sponsored retirement plans (including defined-benefit plans);

3) non-defined-contribution financial wealth; and

4) housing wealth. Ages 51 to 56 were chosen because that is when the respondents in each new cohort enter the HRS, allowing the st

Even though the HRS is the gold standard for wealth and income data, the decline was so unexpected that I asked my colleague, Anqi Chen, to look at data from the Federal Reserves 2016 Survey of Consumer Finances. While the only data readily available were holdings in defined-contribution plans, the pattern was similar to that found in the HRS. The wealth holdings of the late boomers were below those of both the mid and early boomers, who are age 63 to 69.

This pattern of decline is distressing. It suggests that fewer households in the middle of the wealth distribution have 401(k) assets. Given the decline in Social Security replacement rates, an increasing number of households will be falling short.

SOURCE

Posted by Elvis on 01/03/20 •
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Article 43

Pension Ripoff

Friday, May 12, 2023

Burned Boomers Part 9

Wednesday, May 03, 2023

AT&T Pension News - Derisking

Friday, March 17, 2023

France Rams Pension Reforms Without Vote

Friday, December 25, 2020

AT&T Cuts Retiree Pension and Healthcare

Friday, January 03, 2020

Retirement Ripoff Sequel 2

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