MetLife Faces Court Challenges for Pension Risk Transfer and Beneficiary Practices

A would-be class representative whose benefit liability was transferred to MetLife in a pension risk transfer (PRT) deal has filed an expansive lawsuit, challenging the company’s practices across its PRT and group annuity contract services business.

Filed in the U.S. District Court for the Southern District of New York, the complaint names as defendants MetLife, Inc.; the Metropolitan Life Insurance Company; and Brighthouse Financial, Inc. Summarizing the complaint, the lead plaintiff says he is suing these companies “for conversion and unjust enrichment relating to the taking of retirement annuity benefits from retirees.” The plaintiff also seeks “an accounting from MetLife for the amounts taken, interest, and disgorgement of unlawful profits.”

According to the text of the complaint, this action “seeks to hold MetLife accountable for the company’s conversion of more than $500 million in retirement benefits, interest, and unlawful profits over the last 25 years—depriving retirees of important income in their golden years.” The complaint further suggests “MetLife’s systematic conversion of retirement annuity benefits betrayed thousands of annuitants and their beneficiaries.”

“MetLife systematically took ownership over the beneficiaries’ annuity assets, ultimately releasing more than $500 million in reserves that belonged to the beneficiaries, treating the funds as if they belonged to MetLife,” the complaint states. “The scope and scale of MetLife’s betrayal of trust is particularly egregious in light of its failure to pay death benefits in connection with the company’s life insurance business that resulted in the company paying $500 million in overdue death benefits—and being required to look for similar problems in its annuity business.”

The complaint points to various ways that MetLife has allegedly “admitted” or “acknowledged” that it has failed to keep track of beneficiaries, failed to contact them, and/or failed to pay them their benefits when due. In one instance, the complaint points to language in a disclosure slide presented during an earnings call with stock and credit analysts.

Seeking class certification for “all others similarly situated,” the plaintiff goes on to argue that, instead of seeking out “missing” beneficiaries and paying them the proper annuity benefits—or, in failing to locate the beneficiaries after an honest effort, tendering the assets to states under unclaimed property law—the company instead took the money for itself. According to the complaint, the company has variously “acknowledged that it owes as many as 30,000 beneficiaries more than $500 million in annuity benefits.”

“In admitting that it failed to provide these annuity benefits, MetLife provided additional detail concerning its policies and procedures concerning the payment of annuity benefits—which involved nothing more than sending two letters, one when the beneficiary turned 65 and one at age 70,” the complaint alleges. “If MetLife received no response, it simply took the money for itself.”

The text of the compliant offers substantial alleged detail on what the plaintiffs says are shortcomings in the way MetLife markets, sells and services PRT services and the underlying group annuity contracts, or “GACs.” This is especially the case, the complaint alleges, when it comes to the “procedures and protocols for notifying beneficiaries of their eligibility for retirement benefits.” According to the complaint, these “appear designed to ensure that many beneficiaries will never be paid so that MetLife can convert annuity benefits to its own use.”

“MetLife simply makes two attempts at contact—one at age 65 and the only other at age 70.5—and no effort to locate individuals when the mailings were returned as undeliverable,” the complaint alleges. “These notices did not even identify the former employer of the beneficiary. If the beneficiary did not respond to this half-hearted outreach, it was MetLife’s practice to convert the reserve for these benefits and treat the beneficiaries’ retirement benefits as income to itself.”

The full text of the complaint is available here.

Separate challenge from Massachusetts Secretary of Commonwealth

Coinciding with the emergence of this new lawsuit, Massachusetts Secretary of the Commonwealth William Galvin has also charged MetLife with “making misleading statements relating to its failure to make pension payments to hundreds of Massachusetts retirees it had wrongly designated as presumed dead.”

In a separate complaint prepared by Galvin’s office, it is argued that MetLife’s public filings contained material misstatements about the company’s finances resulting from the failure to adequately administer employer pension plans.

“Under these pension plans, MetLife was responsible for reserving enough money to make payments to Massachusetts pensioners, whose average age was 72,” the Massachusetts complaint states. “Instead, some reserves were released and became assets which inflated MetLife’s bottom line.”

As Galvin explains, these charges are the result of an investigation opened by his state’s Securities Division back in December 2017, “after MetLife announced that it had lost track of tens of thousands of pensioners to whom they owed payments.”

Galvin shared the following anecdote in a statement explaining his complaint: “My office was able to locate a majority of the missing Massachusetts residents within just a few weeks. In fact, approximately half of these seniors were still living at the same address MetLife had on file for them for the entire time MetLife failed to make payments to people they had so callously designated as ‘presumed dead.’”

Similar to the lawsuit filed in New York district court, the Massachusetts complaint states that MetLife “did not take reasonable steps to notify plan participants when their pensions were initially transferred.”

“After the transfer, MetLife’s only contact with the pensioners was two form letters, sent more than five years apart, to those to whom payments were owed,” the complaint suggests. “MetLife designated plan participants who did not respond to the notices that were sent to the address on file as presumed dead. Once a plan participant was presumed dead by MetLife, the money to which the retiree was entitled was no longer held in reserve by the company and became assets of MetLife, which were reported in public filings. The complaint states that these reserves should not have been released and resulted in misleading financial statements.”

Galvin says his office presented MetLife with the results of their search efforts in March 2018. Since then, his office “has learned that many retirees have yet to receive the payments they are owed.” Several plan participants have reported to Galvin’s Securities Division that MetLife “has been slow to respond, has lost their paperwork, or has not provided back payments with interest.”

The complaint filed by Galvin’s office seeks an order requiring MetLife to locate all Massachusetts retirees eligible for benefits and provide retroactive and continuing payments to each person. The complaint also seeks sanctions, censure, and an administrative fine.

In response to the lawsuits, MetLife shared the following statement with PLANSPONSOR: “We self-identified and self-reported this issue to our regulator and to the public. We have taken aggressive steps to locate unresponsive annuitants who are due funds and already have or will commence payment, including interest, once the necessary paperwork is complete.”