Insurance titan MetLife will pay a $1 million fine over its failure to pay pension benefits to retirees improperly labeled deceased.
The legal action, filed by Massachusetts Secretary of the Commonwealth William Galvin, revolved around pension risk transfers—where insurers and other financial purchased pension obligations from corporate retirement plans and converted them into group annuity contracts for beneficiaries.
Galvin said the firm contacted retirees using erroneous procedures. Many of these pensioners were unaware that MetLife had ever acquired their benefit contracts. MetLife had sent out two letters to pension recipients, one at age 65, the other at age 70½. Those that did not respond were then labeled as “presumed dead.” Once someone is considered expired, their benefits stop too. This in turn frees their entitled assets from MetLife’s pension reserve, moving them to the unit’s bottom line.
The company has agreed to pay payments with interest to several hundred of Massachusetts retirees and beneficiaries. In February, the company will add $510 million to its reserve as a result, and has estimated that roughly 13,500 of retirees have been affected.
“Our focus since we self-identified and self-reported this issue has been to enhance our processes so that we deliver better service to our customers,” MetLife said in a statement. “This settlement is in line with that focus.”
Neither MetLife nor Galvin could be reached for comment.