New Connecticut law protects retirees' annuity benefits from creditorsPosted On: Jul. 21, 2015 12:00 AM CST
The pension benefits earned by Connecticut residents whose employers transfer those liabilities to insurers under corporate pension derisking — programs will be protected from creditors under a new state law.
In such programs, employers, who include such well-known organizations as Bristol-Myers Squibb Co., General Motors Co., Kimberly Clark Corp., and Motorola Solutions Inc., have transferred billions of dollars in benefits owed to pension plan participants through the purchase of group annuities from insurers.
By reducing the size of their pension plans, employers are less exposed to the impact interest rate fluctuations and investment results can have on how much they have to contribute to their plans.
Such actions, though, can have a serious and negative impact on retirees receiving annuity benefits from insurers. If the retirees get into financial trouble, their benefits no longer are shielded by an Employee Retirement Income Security Act provision from creditors.
The Connecticut measure, signed into law earlier this month by Gov. Dannel Malloy and which goes in effect Oct. 1, assures that the protection from creditors will continue for participants even though the benefits now will be provided by an insurer rather than by the employer.
“This is an important and historic win for Connecticut retirees, Edward Stone, special counsel for the Washington-based organization that backed the legislation, ProtectSeniors.Org, said in a statement.
“This law restores creditor protection for Connecticut retirees and hopefully paves the way for other states to follow suit,” Mr. Stone added.