New York State Assemblyman Steve Katz (R/Mohegan Lake) announced his intention to introduce legislation that would protect retirees whose pensions get sold or spun off by their former employers during a press conference last week.
Katz, who represents parts of Putnam, Westchester, and Dutchess counties, said the intent of legislation is to “protect our retirees and out future generation retirees” from pension stripping transactions, which is when companies sell or transfer the pensions of retirees to an insurance company without that former employees consent. Because the pensions are converted into annuities, the affected retiree would then lose uniform federal protections under ERISA (Employee Retirement Income Security Act) and the Pension Benefit Guaranty Corporation.
Katz said with plenty of retired employee support behind him that the proposed legislation would act to do two things to protect those employees now retired. The first is the company would give the retiree an “iron clad” notification of the pros and cons of the plan. That notification would give the retiree the facts to decide to either take the lump sum of the pension or agree to let the pension money go to the equivalent of a mutual fund.
“What I understand now is you get this little notification saying ‘don’t worry everybody, everything’s going to be just fine,’” Katz remarked. “That is a crime. You are not going to be put in that position.”
“I think what they’re trying to do now to save money is unconscionable,” he added. “But at the very least, they’re going to have the options to give you your money and that is an important thing that we will fight for.”
The second part of the proposed bill, which Katz said is still a work in progress, would require the insurance companies that are purchasing the pensions to guarantee some percentage of the pension to those who are retired. Katz wasn’t sure what the exact percentage would be, but said he would like it to at least be 80 percent.
“You’re not going to be duped by anyone,” Katz said. “That is the essence of what this bill is and should be.”
In 2013, Verizon sold off 41,000 former management retiree pensions to Prudential Insurance Company and General Motors Sold off 76,000 retiree pensions to Prudential Insurance in 2012. Some of those retired employees are New York residents.
John Hyland of Brewster, who served as union chief steward for the Communication Workers of America (CWA) at NYNEX, said retirees are afraid of the lesser protection they now have with pension stripping. He called the practice “corporate greed.” He noted if one of the companies that buy the pension benefits go under, a lot of people will be hurting and said it’s possible considering the most recent recession that saw several companies go out of business.
Jack Cohen of Yorktown, executive vice president of the Association of BellTel Retirees, is one of the 41,000 former employees that had his pension sold by Verizon to Prudential.
“We hope to prevent this from happening to the rest of our brothers and sisters at Verizon or any other company because anyone is vulnerable who has a pension in the private sector,” Cohen said
Katz said the bill doesn’t have a cosponsor yet but he doesn’t anticipate having trouble finding a Democrat to sign on.