Massachusetts Secretary of State William F. Galvin, the state’s top securities regulator, has announced that MetLife, according to the terms of a consent order, will pay a fine of $1 million and provide payments, with interest, to hundreds of Massachusetts retirees and beneficiaries it had wrongly designated as “presumed dead.”
The year-long investigation was initiated on Dec. 18, 2017, after MetLife revealed that it had failed to make payments to thousands of retired workers because it could not locate them. The recipients included Massachusetts retirees who worked for grocery stores, hospitals and manufacturers that have since gone out of business.
Because those employers had sold their pension obligations to MetLife, many of their employees did not realize that they could expect pension payments from MetLife under a group annuity contract. MetLife was required to keep funds in reserve for these retirees and to make payments when the former workers came of age, but it failed to do so and instead released some reserves, which became assets that then inflated MetLife’s bottom line, according to Galvin’s office.
Galvin’s Securities Division charged MetLife with fraud in connection with the misleading statements the insurance company made in public filings about the company’s finances as a result of including those funds as assets instead of maintaining them as reserves.
In addition, the complaint filed in June said that MetLife did not take reasonable steps to notify plan participants when pensions were first transferred. Instead, the company only sent two form letters, more than five years apart, to those to whom payments were owed — and designated plan participants who did not respond to the notices that were sent to the address on file as “presumed dead.”
However, about half of the seniors lost by MetLife were still living at the same address the company had on file for them for the entire time MetLife failed to make payments to them. Galvin’s Securities Division located a majority of them within just two months after MetLife provided their names to the agency as part of its investigation.
“The problem with this system of transferring pension responsibilities is that nobody is policing it,” Galvin said in a statement. He added, “I believe that new legislation is necessary to make sure that retirees do not keep falling through the cracks.”
In addition to providing financial restitution to retirees to whom back payments are owed, the order sanctions MetLife and requires the company to pay a $1 million fine.
In a statement, a MetLife spokesperson said, “Our focus since we self-identified and self-reported this issue has been to enhance our processes so that we deliver better service to our customers. This settlement is in line with that focus.”
— Check out DOL Cracks Down on Efforts to Find Missing Retirement Plan Participants on ThinkAdvisor.