MetLife Inc. hired a law firm to investigate how its retirement business failed to aggressively search for possibly tens of thousands of people owed pension benefits and is planning to hire a specialty firm to help locate the missing people, company executives said in interviews Wednesday.
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The company is working to meet an internal goal to determine by Feb. 1 how much money it owes people, the executives said. It is using databases that have become more robust in recent years to find where people live and is trying to reach them with certified letters. It also will soon employ the outside vendor, which has a specialty in identifying addresses, they said.
The move coincides with a nationwide push by the U.S. Department of Labor to restore pension benefits to beneficiaries whose former employers have lost track of them.
Metlife's executive comments come a few days after the New York insurer disclosed it failed to pay thousands of pensions. Those retirees generally have average benefits of less than $150 a month. At the time, the firm said it believes the group represents less than 5% of about 600,000 people who receive certain benefits from the firm. The company also said the addressing the issue "may be material to our results of operations."
In the interview Wednesday, executives for the big insurer said the firm wants to be able to put a size on the cost of fixing the problem when it details its fourth-quarter earnings on Feb. 1. The cost would include paying pensions back to the date the people were first eligible to draw their monthly income, the executives said.
"We are deeply disappointed we fell short of our own high standards on this issue," MetLife Chief Executive Steven Kandarian said in the company's first interview since its disclosure last week.
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MetLife's disclosure and ramped-up effort stems from a pilot project that it launched in August 2016 partly because the U.S. Department of Labor was stepping up pressure on private-sector pension plans to do a better job finding so-called missing participants, the executives said.
MetLife's pension business isn't regulated by the Labor Department, but its managers were aware of some of the additional steps that these private-sector plans were taking. The DOL effort has been publicized in trade publications and has been the subject of discussion at organizations focused on employer-sponsored benefits programs.
The federal effort began in 2013 at the DOL's regional office in Philadelphia, where benefits advisers were fielding questions from pensioners wondering why they weren't receiving pension benefits mentioned on their Social Security notices, according to an official familiar with the program. Those notices list pensions whose sponsors have reported to the federal government that they have made pension contributions on pensioners' behalf.
MetLife is one of a number of large and highly rated life insurers that contract to take responsibility for some or all of the payments due participants in private-sector plans. These deals are called "pension risk transfer." Many employers with old-fashioned pension plans, under which they pay monthly benefits to retired workers, are eager to reduce their exposure to investment and interest risk in running pensions by striking risk-transfer agreements with insurers.
MetLife has been in the pension business for decades. In years past, it had used regular mail to contact future pension recipients, beginning about six months before their eligibility age for drawing the monthly checks, said Michel Khalaf, a senior MetLife executive whose responsibilities include the pension business. MetLife used addresses it had on file for the people. If the letters were returned as undeliverable, it sought some additional addresses from data firms, and sent more letters.
The pilot project involved "a few hundred" participants, Mr. Khalaf said. MetLife employees tapped into more data sources than previously used, and the company was "more aggressive in trying to find the addresses," Mr. Khalaf said.
The company isn't disclosing details of how many of the people who previously hadn't been located were reached through the project. It was escalated to the attention of Mr. Khalaf in October of this year, and he brought it to Mr. Kandarian.
"The outcome pointed us in the direction that we needed to do more and to evolve our processes" because they "were not as aggressive or robust as they needed to be," Mr. Khalaf said. "The fact that the results came back telling us we can find more of them, that is something we felt compelled to do something about."
Since the pilot project, MetLife has continued to beef up search efforts, including using certified mail to make it stand out as particularly important, the company said.
The law firm is Robinson McDonald & Canna LLP, MetLife said.
"We are committed to making this right" for customers, Mr. Kandarian said.
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(END) Dow Jones Newswires
December 21, 2017 12:30 ET (17:30 GMT)