The Business Council opposes S.6150 (Avella) / A.9013 (Abbate) which would mandate a new legislative and regulatory scheme for annuity contracts used to pay retirees the balance of a pension fund at the termination of a pension plan. This bill would significantly decrease the options available to businesses in dealing with costly pension plans and would limit the ability of some employers to continue providing vital income for retirees.
Over the last several decades, as pension plans have become increasingly unaffordable, employers have been forced to terminate plans in order to simply survive. The federal Employee Retirement lncome Security Act (ERISA) provides rules for the termination of pension plans. ERISA limits plan administrators to paying out the balance of pension plans to employees or retirees through a lump sum or by purchasing an annuity contract that will distribute the balance of the pension fund over time. The option of an annuity is attractive because it pays retirees over time, much like a pension, resulting in the least disruption for retirees.
Owing a fiduciary duty to retirees, pension plan administrators, acting in the best interest of their pensioners, most often opt for annuity contracts through well-capitalized and very stable insurance companies. These insurers are both experienced in this business and have been successful in satisfying both ERISA requirements and their financial obligations for many years. Additionally, insurers are already subject to myriad of regulations and reserving requirements under New York law meant to protect the insured and guarantee funds in the unlikely event of the insolvency of the insurer.
The sponsors' justification for this bill does not state any increased risk to pensioners, now collecting annuity payouts, nor does it site any instance where an annuity has become insolvent. It remains unclear as to what benefits are to be gained by denying New York's pension holders the benefits of annuity payments for their pension fund balances.
For these reasons, The Business Council respectfully opposes S.6150 /A.9013 as contrary to the purposes of Title IV of ERISA and against the best interests of employers and pensioners alike.