MetLife failed to pay some pensions

MichaelB

MichaelB

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MetLife disclosed recently that is failed to pay pensions for “less than 5%” of the beneficiaries with pensions managed by them. The average benefit is less than $150 per month, and would affect up to 15k people. The announcement was made because the cost to remedy this - paying the pensions owed - will have a material impact on earnings. More details here MetLife Discloses Failure to Pay Thousands of Workers' Pensions -- Update

This is one aspect of the discussion on annuities that is not often discussed. Not insolvency, but just not getting paid, and the company not making a serious effort to comply and keeping money that is not theirs.
 
I read that story yesterday and thought the same as your last sentence. I would like to know if criminal charges are being considered.
 
It isn't criminal to not pay money owed if you don't know where to send the check. :facepalm:

These situations are described as beneficiaries that "have moved jobs, relocated or otherwise can no longer be reached via the information provided for them." Secondly, there is no mention of what actions they have taken to try to find these people so to opine that the company hasn't made a "serious effort to comply" without more information is a bit if a stretch.

This whole thing doesn't make a lot of sense to me. Typical industry practice would be to carry liabilities for all contractual obligations... even for people who you "can't find" because ultimately if you can't find them those funds would escheated to the state... the company never gets to keep it and they know that. In my experience, MetLife is very prudent and there is no way that they would not hold reserves for any known contractual obligations.... for example, pensions for people that they can't find (which would result in an escheat obligation anyway).

The only thing that I can think of is perhaps they were blindsided taking over an employer's pension obligation where the employer didn't disclose this liability (didn't include those employees in pension census data or whatever) and MetLife found out about it later. But even then they may have recourse against the pension plan if the liability is the result of bad data provided by the pension plan.

Also, if you were owed a $150/month pension and moved and were no longer receiving your pension check would you just say fuggedaboutit? No, you would contact the pension provided to get your money. It is hard to imagine that there are 30,000 people due $18,000 each that have let it go.
 
I can see someone with a pension benefit who has died or is in a nursing home somewhere and the spouse does not know about the benefit. This was a recent issue with unpaid life insurance policies.

Not sure what is criminal, but if MetLife has to charge this against their future earnings, it means the took that unpaid pension and booked it as profit, instead of leaving it on their balance sheet as an unclaimed obligation.
 
Well, we don't have the details so you are speculating. It could be that MetLife assumed pension obligations from a pension plan in exchange for a lump sum and the plan didn't tell them about these people. Like many things, we should wait for more information before making any judgements.

From my experience in the industry and specifically with MetLife, I am very skeptical that they had a liability recorded and released it because they couldn't find the recipient... if they did then they deserve any trouble that they get.

The issue a number of years ago with unpaid death benefits was where companies were chasing death information for annuities much harder than for life policies and they deservedly got slapped for that inequity in their practices... but they weren't releasing reserves but just retaining the liability until someone made a death benefit claim.
 
The MetLife SEC filing includes this:
We are making our process more robust to include a wider set of search techniques and better utilize available technology. Taking these actions would result in strengthening reserves, which in the period recorded may be material to our results of operations and is not reflected in the outlook presented herein. We do not have an estimate at this point but we plan to provide further disclosure on our fourth quarter earnings call and in our annual report on Form 10-K for the year ended December 31, 2017.
Click to expand...
My bold. That's accounting talk for "we booked that as profit, it ain't, and now we gotta pay it back".

We do not know the nature and intent of the omission, and should withhold judgement until details are available. No doubt, though, that they booking an expense now to account for an unpaid past obligation.
 
Likely, the $18k per year is going to be charged to the plan (it is the plans' liability after all). The loss to MetLife would be any fees that they charged based on net assets, and any plans that were closed down without holding a reserve for "lost" pensioners. I find it hard to believe that they had any knowledge of these people since they would be a part of the actuarial computation and the $$ would be paid out either to the annuitant or escheat to the various states.
 
pb4uski said:
This whole thing doesn't make a lot of sense to me. Typical industry practice would be to carry liabilities for all contractual obligations... even for people who you "can't find" because ultimately if you can't find them those funds would escheated to the state... the company never gets to keep it and they know that. In my experience, MetLife is very prudent and there is no way that they would not hold reserves for any known contractual obligations.... for example, pensions for people that they can't find (which would result in an escheat obligation anyway).
Click to expand...

+1
My experience was in funds/stocks and those had to be reported for escheatment to the state too. I'm guessing and annuity is exactly the same.
 
I think it was MetLife who a company I worked at bought the payments (or whatever it was)...

The company wanted to get money out of the pension and closed it.... if you had a certain amount it went to MetLife, if not you got a check... this was back in the 80s.... I got a check, but I bet there are a number of people who forgot they had a pension with them....

OH, BTW, they closed it down a second time for some reason and I think that also triggered another pension....
 
I have to wonder, had the money been owed to Metlife, would they still have had so little luck finding the individuals involved? I recall someone one posting here that stated that there are companies that use the internet and other resources to basically find anyone if they are not living on a desert island.
 
MichaelB said:
This is one aspect of the discussion on annuities that is not often discussed. Not insolvency, but just not getting paid, and the company not making a serious effort to comply and keeping money that is not theirs.
Click to expand...

As dirt_dobber said, this part jumped out at me too. Folk often seem to regard annuities and pensions as rock solid and "100% guaranteed" in a world where, in reality, nothing is. Things just have different degrees of perceived and actual risk.

And then we die :D
 
Major Tom said:
As dirt_dobber said, this part jumped out at me too. Folk often seem to regard annuities and pensions as rock solid and "100% guaranteed" in a world where, in reality, nothing is. Things just have different degrees of perceived and actual risk.

And then we die :D
Click to expand...


This is also similar to another story a few months (a year?) ago where they found a number of insurance companies were not paying on life insurance policies even though they knew the person was dead....

IIRC, some of them had stopped paying on an annuity but failed to notify the heirs that there was a life policy in place....
 
Of course the issue is either not notifing or not knowing who to notify if there are address changes. Of course I do wonder why these did not end up in the state unclaimed propery registry. I did move and a year and a half later a check was sent to my old address which I did not know about, but about 10 years later I found it in the unclaimed property registry. Perhaps the states should require that if pensions are supposed to pay out and after sufficient time has elapsed they pension go to the state log. (Note that once an ancestor would have reached 100 one should check the log for the states the person lived in because a lot of life insurance policies pay out at age 100)
 
Texas Proud said:
I think it was MetLife who a company I worked at bought the payments (or whatever it was)...

The company wanted to get money out of the pension and closed it.... if you had a certain amount it went to MetLife, if not you got a check... this was back in the 80s.... I got a check, but I bet there are a number of people who forgot they had a pension with them....

OH, BTW, they closed it down a second time for some reason and I think that also triggered another pension....
Click to expand...

As DW and I approached Medicare age, we got both notices from Social Security reminding us of several retirement plans that we were participants in. They were plans from a long time ago (In one case over 40 years ago) and had since been rolled over, but SS knew and notified us. I'm not sure if they do it for ALL plans and participants.
 
pb4uski said:
Also, if you were owed a $150/month pension and moved and were no longer receiving your pension check would you just say fuggedaboutit? No, you would contact the pension provided to get your money. It is hard to imagine that there are 30,000 people due $18,000 each that have let it go.
Click to expand...

$18,000? Isn't it $1,800 annually? ($150x12)


-BB
 
CRLLS said:
As DW and I approached Medicare age, we got both notices from Social Security reminding us of several retirement plans that we were participants in. They were plans from a long time ago (In one case over 40 years ago) and had since been rolled over, but SS knew and notified us. I'm not sure if they do it for ALL plans and participants.
Click to expand...

Interesting, I have never heard about this. But this was no longer a plan as it was converted to an annuity based on what the plan was liable to pay.

An update my previous post as I was curious and looked it up... it is Prudential.
 
Last edited:
MetLife has disclosed more details regarding this issue. Around 13500 pensioners were not paid, going back 25 years.

According to the WSJ
In a regulatory filing Tuesday, MetLife attributed the problems to a policy established 25 years ago to contact would-be pension recipients twice. This was rather than employing aggressive search techniques to track down people and make them aware of their eligibility for monthly income. It then shrank balance-sheet reserves that reflected MetLife’s payment obligation to these people.
Click to expand...
“Shrank balance sheet reserves” is a euphemism for “booked the money as profit”. The total charge against 2017 earnings for this is $585M.

Absent from the reporting is feedback or response from the affected pensiones. I can imagine many stories about dead ends, unreturned calls and unanswered correspondence.
 
I wonder what they are doing about the missed RMDs.

I think those are subject to a 50% excise tax (paid by the annuitant).
 
MetLife.... who's surprised? Numerous settlements and fines in the tens of millions for fraudulent/deceptive/poor business practices going back decades. I think they still hold the record for FINRA's highest fine. That time, they were misrepresenting and omitting material information in connection with variable annuities.

Throw the execs in jail or at least hold them personally financially liable.
 
Met Life is not a first rate operation administering their car insurance. Don't know about the rest of their services. I changed companies quickly.
 
Met handled some benefits for Megacorp and seemed to me OK. Their handling of this issue is shameful. This excerpt from the Bloomberg link below is laughable: “We phone people now,” Hele said. “Some older people pick up the phone. They may not read their mail. That’s working pretty well actually,” he said, adding that other new efforts include using the internet and certified mail.https://www.bloomberg.com/news/arti...paign=headline&cmpId=yhoo.headline&yptr=yahoo
 
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