The New York State Department of Financial Services is imposing $19.75 million in fines on Metropolitan Life Insurance Company, a unit of MetLife Inc., in connection with allegations of pension plan administration problems.
MetLife agreed to pay the fines, pay $189 million in restitution to affected pension plan participants in New York state and elsewhere, and develop proposals for ways it could do better in the future in a consent order.
Michel Khalaf, the president of MetLife’s U.S. business, signed the consent order on behalf of Metropolitan Life. Khalaf is on track to become president of MetLife Inc. May 1.
A link to a copy of the consent order is available here.
MetLife, like many other big insurers, assumes responsibility for employers’ pension plans by selling the employers group annuities. In late 2017, the company was administering pension benefits for about 600,000 retirees.
MetLife reported in December 2017, in a notice filed with the U.S. Securities and Exchange Commission, that it had improved the way it tracked participants and discovered that it had lost track of up to 30,000 of the participants. The company said it believed the tracking problems reflected a material weakness in controls, and that it had reported that weakness in controls both to the New York department and to the SEC.
The company said it was adding $510 million in reserves to its group annuity operation, to restore reserves it had previously released, after concluding that the number of plan participants was lower than it actually was.
Maria Vullo, New York state’s outgoing financial services superintendent, acknowledged in a statement that MetLife told the department about the retiree tracking problems.
“The department appreciates MetLife’s cooperation in self-reporting its claims issues, resolving these matters, and committing to full restitution to all eligible beneficiaries,” Vullo said in the statement.
MetLife has already paid about $123 million of the $189 million in restitution owed to the plan participants, Vullo said.
New York officials reported in the filing that they believe the plan participant tracking problems that led to the group annuity reserve release involved 13,712 group annuity certificates.
The New York department is expecting MetLife to use the Social Security master death file and other tools to determine whether plan participants have died, and they will be requiring the company to pay for a commercial locator service to try to find participants who appear to be missing.
MetLife also must send letters to group annuity certificate holders at least years before those certificate holders’ normal retirement dates, send those certificate holders certified letters around their normal retirement dates, and send the certificate holders letters at least every five years after the normal retirement dates until the insurer begins paying benefits, determines that it owes no benefits, or classifies the obligations to a plan participant as abandoned property.
MetLife said in a statement in response to the consent order announcement that it “continuously improves its systems and processes to take advantage of best practices and technology innovations.”
“Following a market conduct exam by the New York State Department of Financial Services of Metropolitan Life Insurance Company, MetLife has agreed to take actions, many of which are already in progress, to improve our procedures to better serve our customers,” the company said.
— Read Pension Risk Transfer Volume Falls, on ThinkAdvisor.