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Compliance July 10, 2015
Conn. Passes Protection for Transferred Pension Assets
Legislation in Connecticut will protect transferred pension assets from creditor claims.
Reported by John Manganaro
Connecticut Governor Dannel Malloy signed Public Act 15-167 into law, bringing additional protections to retirees’ assets from creditor claims.
Under the text of the law, any annuity contract to which employee defined benefit (DB) plan assets are transferred and lose protections of the Employee Retirement Income Security Act (ERISA) and insurance by the Pension Benefit Guaranty Corporation (PBGC) will be considered a trust protected from claims of creditors.
In a statement, the advocacy group ProtectSeniors.org said the expanded protections come “at a time when more and more U.S. companies have been offloading their pension obligations to investors, primarily U.S. based insurers.”
The protections in the law are extended to other retirement accounts, including:
- “any trust, custodial account, annuity or insurance contract established as part of a Keogh plan or a retirement plan established by a corporation which is qualified under Section 401, 403, 404 or 409 of the Internal Revenue Code of 1986, or any subsequent corresponding internal revenue code of the United States, as from time to time amended;”
- assets contributed to or rolled into “any individual retirement account [IRA] which is qualified under Section 408 of said internal revenue code to the extent funded, including income and appreciation;” and
- “any medical savings account established under Section 220 of said internal revenue code, to the extent such account is funded by annual deductible contributions or a roll-over from any other medical savings account as provided in Section 220(f)(5) of said internal revenue code.”
The PBGC has expressed concern about the loss of protections for assets involved in a pension risk transfer, and the Pension Rights Center has called for a moratorium on such actions.
Legislation was also introduced in the New York State Senate and Assembly that would provide protections and new disclosures for retirees whose pension assets and accrued benefits are sold or transferred by former employers.