State Sen. Tony Avella, D-Bayside, said he would introduce a bill that would protect existing retirees whose pensions were sold off without advance notice through a process known as pension stripping.
The process of “pension de-risking” occurs when a company sells the pensions of its retirees – often to an insurance company – without retirees’ permission.
The method has the effect of converting pensions into annuities, causing retirees to lose protections covered by the federal Employee Retirement Income Security Act as well as Pension Benefit Guaranty Corporation insurance coverage.
Avella said pension stripping removes the financial risk for corporations, but transfers the burden of risk to pensioners.
“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,” the senator said. “By leaving affected retirees with virtually none of the long-standing federal pension protection mechanisms provided by ERISA and PBGC, companies are shifting the burden of risk onto pensioners.”
Under Avella’s bill, the state would be mandated to put pension protection mechanisms in place that had previously been provided by ERISA and the PBGC before the pension plans were transferred.
The senator referenced a move by Verizon 2012 during which the company sold off 41,000 management retirees to Prudential Insurance Company.
Jack Cohen, executive vice president of the 128,000 Association of BellTel Retirees, said he was upset at the decision.
“I was one of the 41,000 Verizon managers who had my pension moved to a Prudential group annuity contract,” he said. “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.”