MetLife Inc. agreed to pay $1 million to settle claims from the Commonwealth of Massachusetts that it made misleading statements to investors and failed to pay benefits retirees, some of whom it improperly characterized as “presumed dead.”
Massachusetts Secretary of the Commonwealth William Galvin, in announcing the settlement, said MetLife would provide payments, with interest, to hundreds of the state’s retirees and beneficiaries.
The case was focused on MetLife’s practice of acquiring the assets of employer pension plans and converting them into group annuity contracts. The company has been in the pension risk transfer business for decades.
“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.”
In his complaint, Galvin said MetLife used inadequate procedures to contact retirees, sending perfunctory letters to people who might not have known it assumed responsibility for their pensions. When the retirees did not respond, MetLife presumed they were dead, releasing the funds they would have been entitled to from its reserves and increasing MetLife’s profits, according to the complaint.
“Under these pension plans, MetLife was responsible for reserving enough money to make payments to Massachusetts pensioners, whose average age was 72,” Galvin said in a statement. “Instead, some reserves were released and became assets which inflated MetLife’s bottom line.”
In January of this year, MetLife announced the Securities and Exchange Commission was investigating reports that some of its customers hadn’t received annuity payments, and it was postponing the release of its fourth quarter earnings. The company said it would need to strengthen its capital reserves and would set aside $510 million as a result. It estimated the number of retirees affected, both in and outside Massachusetts, is about 13,500.
MetLife has said it is cooperating with an SEC investigation as well as an examination by New York’s Department of Financial Services.