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A consumer group says it plans to ask Congress to impose a moratorium on pension plan de-risking approaches to give lawmakers time to examine the implications of de-risking on plan participants.
In the most typical de-risking approach, employers give certain plan participants — typically employees who have left but are not yet eligible to receive a benefit, the opportunity to convert their annuity to a cash lump payment.
In another approach, an employer will purchase a group annuity from an insurance company, with the insurer then responsible for paying the promised benefits to plan participants.
Verizon Communications Inc., which this week announced it is buying an annuity from Prudential Insurance Co. of America to cover $7.5 billion in benefits earned by about 41,000 management retirees, is the latest employer to employer to adopt such a de-risking approach.
But the Washington-based Pension Rights Center says de-risking can pose risks to plan participants.
“What is the exposure of the insurance companies that are taking on these large group annuity contracts? Do people understand the consequences of taking a lump sum? These are the types of questions that we want to make sure are addressed,” Karen Friedman, the center's executive vice president and policy director said in a statement Thursday.
“We need to stop and take a deep breath and make sure that the retirement security of the people affected by these moves is fully protected,” she said.
The New York Times Co. disclosed Friday that it will give about 5,200 former employees who are eligible for but not yet receiving monthly pension benefits the opportunity to convert their future annuity to a lump-sum benefit.