BOSTON (Reuters) - MetLife Inc will pay a $1 million fine to resolve claims that it made misleading statements to investors in failing to pay pension benefits to thousands of retirees it improperly treated as “presumed dead.”
Massachusetts Secretary of the Commonwealth William Galvin announced the settlement on Wednesday. The deal resolves an administrative case that Galvin’s office filed against MetLife in June.
As part of the settlement, Galvin’s office said that MetLife will provide payments, with interest, to hundreds of Massachusetts retirees and beneficiaries.
In an administrative complaint, Galvin’s office accused MetLife of making misleading statements to investors regarding the sufficiency of the reserves it was required to maintain to meet its obligations to pensioners.
Following December’s revelation, MetLife said in February it would increase the reserves by $510 million. The company has estimated that the number of retirees affected, both in and outside Massachusetts, is about 13,500.
“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.”
The case centers on MetLife’s business over the last several decades of acquiring the assets of employer pension plans and converting them into group annuity contracts in a process called pension risk transfer.
Galvin’s complaint said MetLife relied on inadequate procedures to contact retirees, many of whom may not have known the company took over the pension responsibilities.
MetLife contacted them primarily by sending two perfunctory letters at age 65 and 70-1/2. When retirees did not respond to them, MetLife categorized them as “presumed dead,” the complaint said.
By marking someone as “presumed dead,” the assets to which the retiree was entitled were released from the reserve, increasing MetLife’s bottom line, Galvin alleged.
Reporting by Nate Raymond in Boston; Editing by Jeffrey Benkoe