Sen. Orrin Hatch’s Secure Annuities for Employee (SAFE) Retirement Act would benefit the life insurance industry, Moody’s Investors Service found in their most recent credit outlook released one week after the bill was introduced in the Senate.
The bill, introduced on July 9, would allow the private market to assist state and local governments with their pension liabilities. Currently, these plans are woefully underfunded with varying ominous estimates being released as of late.
The private market in this case would be state-licensed, major life insurers with extensive experience administering retirement business that also have sizeable assets under management. These large insurers would sell market-based, fixed annuity contracts to local governments through a bidding process.
Senator Hatch, in his own report on underfunded pensions, released in 2012, found that underfunding of state and local pensions could surpass $4 trillion. Moody’s feels that even a fraction of that amount will, “ensure the life insurance industry a significant amount of volume.”