MetLife Inc. will pay a $1 million fine to Massachusetts in its first regulatory settlement after the insurer failed to pay 13,500 people their pension benefits.
The big New York insurer disclosed almost exactly one year ago that it had failed to adequately search for beneficiaries of private-sector pension plans for which it had taken on responsibility. Instead, it designated the people as “permanently unresponsive” after a couple of unanswered letters and booked as profit the money that should have been paid out. Some retirees were owed money from as far back as the 1990s, with amounts averaging less than $150 a month.
Massachusetts Secretary of the Commonwealth William F. Galvin said in an interview that the fine follows a probe covering hundreds of retirees in the state.
“Many of the people affected are elderly and are surviving on a fixed income,” he said. “While the payments may have seemed small or insignificant to MetLife, these checks could have made a big difference for the people who never received them.”
A MetLife spokeswoman on Tuesday said that the insurer “self-identified and self-reported” the problem to regulators and overhauled its search process for locating beneficiaries. It has said it is paying interest to beneficiaries on their overdue money.
MetLife said it is continuing to cooperate with an investigation by the Securities and Exchange Commission, an examination by New York’s Department of Financial Services and some other inquiries.
In addressing the matter, the insurer early this year said it had bolstered its pension-payment reserves by $510 million pretax to adjust for improper releases in earlier years. The 13,500 people who hadn’t received their benefits represented about 2% of the 600,000 people for whom MetLife had responsibility as of early 2018.
Approximately half of the Massachusetts residents that MetLife wasn’t paying were still living at addresses MetLife actually had on file, Mr. Galvin said. Among recipients of the back payments will be retirees who worked for grocery stores, hospitals and manufacturers no longer in business, he said. Their average age is 72.
The state also found that some retirees died without receiving their pension payments, and that their beneficiaries were likely entitled to payments from MetLife.
The settlement resolves a complaint filed in June against the insurer by Mr. Galvin’s Securities Division, accusing MetLife of fraud in connection with statements about the pensions in past public financial filings. The complaint said MetLife didn’t take reasonable steps to reach plan participants. MetLife has signed a consent order, which details steps it is taking to locate people.
MetLife’s disclosure of the matter in December 2017 highlighted a widespread challenge that faces insurers in the booming pension-risk-transfer business, and many employer-sponsored pension plans that remain in place. In a sign of concern about monthly benefits not always being paid to retirees, the U.S. Department of Labor in recent years has been stepping up pressure on private-sector pension plans to do a better job finding missing participants.
Mr. Galvin said he believes that federal legislation may be required to address the matter.
“There is a real gap,” he said in the interview. “Cheating is cheating. We have to stop it.”