Massachusetts Secretary of the Commonwealth William Galvin on Wednesday hit MetLife Inc. with a $1 million fine and ordered the insurance firm to pay restitution to retirees and beneficiaries who it failed to locate after taking over their retirement plans.
Since January 1992, MetLife had bought pension plans from approximately 100 employers — such as grocery stores, hospitals and manufacturers — that employed workers in Massachusetts, according to the order. Many of the companies have since gone out of business. MetLife assumed responsibility for paying the pension obligations through a group annuity contract.
But MetLife was not rigorous in tracking down those who were supposed to receive payments from the annuity. The insurance firm sent one letter to the employees at the time of their normal retirement date and another when the annuity holder reached the age of 70½.
If MetLife didn't hear from the employee after the first letter, it made no follow-up. If it didn't hear back after the second letter, the firm assumed the person would never respond. He or she was "presumed dead," Mr. Galvin said.
As part of an investigation opened a year ago, MetLife provided a list of the missing pensioners to Mr. Galvin's office, which was able to locate a majority of them within two months. In accordance with Wednesday's order, MetLife will pay them or their beneficiaries their retirement funds with interest.
"My primary goal in this investigation has always been to get this money returned to the retirees to whom it is owed," Mr. Galvin said in a statement. "Many of the people affected are elderly and surviving on a fixed income. 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. They will now receive those payments, with interest."
MetLife neither admitted nor denied the charges in the order.
"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 spokeswoman Kim Friedman said in a statement. "This settlement is in line with that focus."
MetLife maintained liability reserves to pay the pension obligations it assumed. It released the reserves associated with the group annuity for thousands of participants who were presumed dead. Last June, Mr. Galvin charged MetLife with fraud because the improperly freed reserves were reported as assets and distorted MetLife's financial results.