Michael Calabrese, NRLN Senior Policy Advisor, who researched and wrote the NRLN/AREF white paper on Pension Plan ‘De-Risking’: Strengthening Fiduciary Duties to Protect Retirees testified on July 18 before the Employee Retirement Income Security Act (ERISA) Advisory Council.

Michael told the Council members that NRLN’s surveys of its members shows that threats to their income security from a pension plan termination, or from a de-risking transaction that transfers a sub-group of participants from their pension plan to an insurance company, is one of their greatest fears. 

These fears are rising in light of the rapidly growing volume of de-risking transactions, as well as major changes in the insurance and annuity industry. 

He noted that one of ERISA’s core principles is its anti-cutback rule. No pension risk transfer should make a retiree or other participant worse off. Throughout workers’ lives they believed that the guaranteed monthly income they earned would be there for them as retirees and they had the additional value of a Pension Benefit Guaranty Corporation (PBGC) guarantee and other ERISA protections. 

“A fiduciary standard based on ERISA Section 404(a) should more explicitly require single employer plan fiduciaries to negotiate annuity contract provisions that reasonably replicate ERISA protections in the event of the insolvency of the primary annuity provider,” Calabrese said. “Foremost among the protections that should be incorporated in a distributed annuity contract is full reinsurance of the monthly benefit itself.