BILL NUMBER:S6150

TITLE OF BILL:  An act to amend the insurance law, in relation to
providing protection to certain retirees from pension de-risking
transactions

PURPOSE OR GENERAL IDEA OF BILL:

The purpose of the bill is to provide necessary protection to retirees
whose pension plans are entirely divested of all ERISA protections as
a result of a group annuity purchase from a life insurance company.

SUMMARY OF SPECIFIC PROVISIONS:

Section 1 of the bill amends the insurance law by adding a new section
3219-a relating to pension de-risking transactions with an annuity.

The new section requires that an annuity issued by an insurance
company licensed to do business in New York State which sells an
annuity intended to provide pension benefits to retirees of any
company, corporation, limited liability company or association shall
include:

1) mandatory disclosures, regulatory approval and an opportunity to
challenge or opt out of any pension de-risking transaction that
attempts to transfer retiree benefits from a federal Employee
              

Retirement Income Security Act ("ERISA") protected plan to a
substitute benefit provider not covered under ERISA;

2) supplemental protections in the form of a third party guarantee or
reinsurance contract so as to equal the scope of coverage offered by
the Pension Benefit Guaranty Corporation ("PBGC") after an annuity
provider insolvency and subsequent determination of any shortfalls
that might arise after New York Life and Health Insurance Guaranty
Association ("NYLHIGA") contributions are determined so select
retirees within a plan are not unfairly discriminated against;

3) provision of additional protections including mandatory disclosures
by the transferring entity and the substitute pension benefit
provider, uniform fiduciary standards and disclosures, uniform and
equivalent protection from creditors and bankruptcy trustees;

4) allowing retirees receiving pension benefits the option to request
a lump sum cash out option subject to certain mandatory disclosures
regarding the tax consequences and dissipation risks associated with
lump sum distributions and independent legal or financial advisor
oversight;

5) all de-risking transactions must be vetted and approved by an
independent third party created by and with the approval of the
superintendent; and

6) all subsequent transfers of group annuity contracts must be vetted
and approved by an independent third party created by and with the
approval of the superintendent.


Section 2 sets forth an effective date one hundred and twenty days
after it shall have become law and shall apply to all policies and
contracts issued, renewed, altered, or amended on or after such date.

JUSTIFICATION:

In recent years pension plan sponsors have utilized "annuity buy-outs"
in the process of either completely terminating a pension plan or as a
"de-risking" strategy which allows the plan sponsor to reduce the
plan's liability by amending the plan and transferring certain
employee pension plans into allocated group annuity contracts.

As a result of the annuity buy-out, the plan sponsor no longer pays a
premium to the Pension Benefit Guaranty Association ("PBGC") and the
monthly payments to retirees are no longer backed by the PBGC. In
addition, ERISA fiduciary standards do not apply and ERISA no longer
governs the benefits. These changes leave affected retirees with
virtually none of the long standing federal pension protection
mechanisms provided by ERISA and the PBGC that apply to employee
benefit plans including mandatory disclosures in transfers between
benefit providers, uniform fiduciary standards and disclosures,
uniform and equivalent protection from creditors and bankruptcy
trustees.

Arguments stating that ERISA protections remain are simply false and
disingenuous. Therefore, it is necessary for the state to put in place
pension protection mechanisms that ERISA and the PBGC had provided
before the pension plans were transferred into allocated group annuity
contracts.  PRIOR LEGISLATIVE HISTORY:

None.

FISCAL IMPLICATIONS:

None to the state.

EFFECTIVE DATE:

This act shall take one hundred and twenty days after it shall have
become law and shall apply to all policies and contracts issued,
renewed, altered, or amended on or after such date.