UNITE HERE Calls on Department of Labor to Update Guidance on Pension Risk Transfer, Highlights Recent Activity of Brookfield Reinsurance as Latest Reason

In a public comment submitted to the Department of Labor’s Employee Benefits Security Administration (EBSA) on July 10, 2023, UNITE HERE called for a modernization of the current guidance for pension plan fiduciaries on pension risk transfer (PRT), in light of the rapid growth of private equity-backed insurers in the life and annuity insurance industry. UNITE HERE wrote that “the need for robust guidance (is) exemplified by the investment behavior of American National Insurance Company in the fourteen months since its acquisition by Canadian-based private equity giant Brookfield Corporation.”

UNITE HERE submitted the testimony for the July 18^th open meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans (also known as the ERISA Advisory Council) of EBSA. The Council’s open meeting is pursuant to a consultation mandated by last year’s bipartisan SECURE 2.0 Act.

UNITE HERE’s comment called for updated guidance in light of the growth of private equity-backed life insurers offering PRT. “Since group annuity beneficiaries lose their ERISA rights once they’ve been lifted-out of their defined benefit plans in a PRT,” UNITE HERE wrote, “it is imperative that plan fiduciaries are able to differentiate between those providers whose core competency is long-term risk management versus those who bill themselves as expert asset managers and spread investors.”

Citing Brookfield’s (NYSE: BN) recent acquisition of American National Insurance Company as the latest example of why updated fiduciary guidance is needed, the UNITE HERE comment contends, “In the first five months after Brookfield’s acquisition, American National placed its entire bond portfolio into ‘available for sale’ status, sold billions of dollars worth of liquid securities, and began reinvesting the proceeds primarily in complex, illiquid securities, most of which were acquired from other Brookfield affiliates.”

The comment also criticizes the Texas Department of Insurance (TDI) for failing to “oversee the integrity of the insurer’s statutory filings.” UNITE HERE identified more than $3 billion in related-party investments on American National’s last four quarterly investment schedules. However, the majority of these were listed as “unaffiliated.” TDI has refused to release documents explaining the rationale for granting Brookfield Asset Management (NYSE: BAM) a Disclaimer of Affiliation with American National in 2022.

The issue of how Brookfield-owned insurance companies report their related party investments is all the more critical in light of Brookfield Reinsurance’s (NYSE: BNRE) pending deal to acquire Des Moines-based annuity provider American Equity (NYSE: AEL). According to the merger documents recently filed by the parties to that merger, Brookfield Reinsurance “shall be deemed not to be Affiliates or portfolio companies of BN [Brookfield Corporation], BAM [Brookfield Asset Management] and their respective Subsidiaries.”

The comment can be viewed in its entirety at https://www.privateequityretirementwatch.org/UHEBSAcomment.

UNITE HERE is the hospitality workers’ union in the U.S. and Canada, representing 300,000 workers in hotels, gaming, food service, airports, and more.

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“It is imperative that plan fiduciaries are able to differentiate between those providers whose core competency is long-term risk management versus those who bill themselves as expert asset managers and spread investors.”