MetLife has been ordered by New York state regulators to pay more than $200 million for failing to locate and pay thousands of pension policyholders and beneficiaries.
The New York State Department of Financial Services ordered MetLife Insurance Company to pay a $19.75 million fine and $189 million in restitution to policyholders for failures in its pension benefit transfer business, according to an announcement from New York Financial Services Superintendent Maria T. Vullo on Monday.
“Today’s action is a victory for policyholders, whose benefits were not paid due to MetLife’s failures, with the department taking the necessary action to protect consumers,” Vullo said in released comment. “The restitution and other corrective actions mandated under this consent order will ensure that consumers are paid the benefits to which they are entitled and that an appropriate fine is paid and procedures put in place to prevent this from happening again.”
Between 1992 and 2017, MetLife is alleged to have improperly released reserves for 13,712 group annuity certificates, resulting in a reserve increase of more than $500 million. The company also failed to adequately search for group annuity certificate holders to whom it owed pension benefits, according to state officials.
The Department of Financial Services alleges that MetLife also failed to search the Social Security Death Master File for group annuitants when a Social Security number was found missing or invalid, failed to confirm the death of an insured or reach out to beneficiaries when it lacked specific information in its administrative systems and failed to reach out to insured individuals to clarify variations of their information contained in its systems.
Furthermore, the insurer is alleged to have failed to confirm that variable annuity replacement disclosures were accurate and compliant with regulations and to have failed to present consumers with an accurate fee comparison between existing and proposed variable annuity contracts.
As of the time of the announcement, MetLife had already paid $123 million of the $189 million in retroactive benefits owed to its policyholders, according to the press release.
In addition, the insurer is projected to set aside $63 million for expected death claims based on a Social Security Death Master File process that regulators are requiring MetLife to use to find insurance and annuity contract holders who have died and where beneficiaries are unaware that they are entitled to benefits.
MetLife will also make $1.85 million in monthly payments to consumers as it completes a group annuity remediation process and $1.5 million in restitution to consumers whom it failed to provide with accurate comparisons of fees and expenses when transferring between variable annuity contracts.
The Department of Financial Services also ordered MetLife to establish and maintain full statutory reserves for all of its group pension certificate holders, to pay retroactive benefits with interest to already retired group certificate holders or their beneficiaries, and to send letters to all group annuity certificate holders no later than five years before their normal retirement date, and letters at least every five years thereafter until benefits are paid or the insurer determines it has no payment obligation.