ConnieStorer Posted May 6, 2015 Posted May 6, 2015 We have a terminating DB Plan with several current Retirees. We have shopped extensively for an annuity provider that would cover all Retirees but are running into a "snag". The insurance companies are willing to quote on six Retirees but none will quote on the seventh. This Retiree was born in 1929 and they say he is just to old to quote with the size of our group as a whole. Has anyone had this problem. We have corresponded with the PBGC but they just give us the names of a few more insurance companies to try and then mentioned that we could call our State Insurance Dept. Any suggestions!
Andy the Actuary Posted May 6, 2015 Posted May 6, 2015 Whad? Never heard of such a thing. Which insurance companies have been solicited? Would anticipate that an insurance company such as The Principal would write this annuity. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.
My 2 cents Posted May 6, 2015 Posted May 6, 2015 Born in 1929 is too old? Are they using the 1937 mortality table for pricing? Are they afraid of some kind of anti-selection (based on the idea that any 85-year old wanting an annuity must be in extraordinarily great health so as to live years longer than would be predicted by any reasonable mortality table)? Have you looked into one of those annuity search firms? I would imagine they know insurance companies able to handle older annuitants. I have seen plans with provisions that change the QOSA to a 66 2/3% joint form if the insurance company cannot handle a 75% joint form. That has always puzzled me since I think every insurance company still in existence should have no problem with a 75% form. Being unable to have that kind of flexibility went out the window when computers generally became available and hand-calculated rate tables became obsolete. Same thing for annuity costs for people over age 80. Always check with your actuary first!
ConnieStorer Posted May 6, 2015 Author Posted May 6, 2015 His date of birth was actually 1923 so I guess he is 92 years old right now. The forms of benefit is Life Annuity. The Principal would not quote on him!
Andy the Actuary Posted May 6, 2015 Posted May 6, 2015 Supposedly an insurance company issued a $40 million personal disability income policy to Detroit pitcher Max Scherzer to safeguard against injury in 2014 when he played without a contract. The Principal won't issue a life annuity! What reason did The Principal give for declining to bid? The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.
david rigby Posted May 6, 2015 Posted May 6, 2015 His date of birth was actually 1923 so I guess he is 92 years old right now. The forms of benefit is Life Annuity. The Principal would not quote on him! Shocking. Please keep us informed as you find out more information about this. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.
ConnieStorer Posted May 6, 2015 Author Posted May 6, 2015 We were going through two different insurance agents to try and see who could get the best deal. I will find out what reason they were given when they declined to quote.
Kevin C Posted May 6, 2015 Posted May 6, 2015 We terminated a small DB plan last year. An annuity was purchased covering 4 retired participants for a total of $152,000. The oldest retiree was born in 1927. We received quotes from Met Life, United of Omaha and Principal. We used an annuity search firm to get the quotes. The only problem we've had getting quotes was one plan with a participant who elected a deferred annuity. A couple of the companies refused to give a quote because of the deferred annuity.
Andy the Actuary Posted May 6, 2015 Posted May 6, 2015 Suggestion from a trusted broker was to contact BCG Terminal Funding. The material provided and the opinions expressed in this post are for general informational purposes only and should not be used or relied upon as the basis for any action or inaction. You should obtain appropriate tax, legal, or other professional advice.
ConnieStorer Posted May 7, 2015 Author Posted May 7, 2015 Thanks for the suggestion. We will contact BGC to see if they can help.
Peter Gulia Posted May 7, 2015 Posted May 7, 2015 Were the plan's participants offered a single sum? If so, do you think the insurer is worried about an adverse-selection risk because the 92-year-old decided that a life annuity is a better deal than the offered single sum? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com
jpod Posted May 7, 2015 Posted May 7, 2015 Adverse selection meaning "this guy must have some great genes to turn down the lump sum"?
My 2 cents Posted May 7, 2015 Posted May 7, 2015 Adverse selection meaning "this guy must have some great genes to turn down the lump sum"? Probably not the case at all! If this is at all typical, the 92-year old probably retired years ago. It is unlikely that the 92-year old is being given any choices - in all but the largest plans, everyone already in pay status will have an annuity purchased, providing ongoing payments in the same amount and form as before the plan termination. And this does not sound like one of the largest plans! Always check with your actuary first!
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