Retirees With Executive Life Benefits Afraid
“I’m totally dependent, and I’m scared,” said Lillian Finan of Woodland Hills, whose widow’s benefits are in the shaky fiscal hands of Executive Life Insurance Co., seized last week by California regulators.
Finan’s late husband, Raymond, worked 33 years for Blue Cross of California, which switched its pension fund in 1987 for an annuity from Executive Life.
“It’s hard to live with stress, waiting every month for the check and not knowing whether the other shoe will drop,” Finan, 70, said in a telephone interview Wednesday.
Thousands of retirees of Blue Cross, Revlon, Cannon Mills and dozens of other firms share Finan’s anxiety. They wonder if the troubled insurance company, which placed much of its assets in junk bonds, will have enough resources to keep the pension checks coming.
Corporate managers also are watching anxiously, hoping that they will not have to intervene to rescue former workers whose retirement plans were converted into Executive Life annuities. (An annuity is an investment vehicle that makes fixed payments for the lifetime of a beneficiary.)
No one has missed a check yet, and officials say the Executive Life operations in California and New York have ample resources to meet their current obligations.
Revlon, with 3,000 retirees covered by an Executive Life annuity, sent the retirees a letter saying, “Your security is of topmost concern,” but it stopped short of pledging to guarantee the checks if First Executive cannot cover them.
“The information we’ve got is that payments are being made and will continue to be made,” said James Conroy, Revlon vice president for public affairs.
At RJR Nabisco, with 3,000 affected retirees, “we think it’s way too early to speculate,” said spokesman Jason Wright. “Like the retirees and everyone else, we’re watching the situation. There hasn’t been a problem yet. We haven’t had any complaints.”
The federal government guarantees pension plans in the event that a company goes broke or cannot make contributions to the plan. But as soon as a company replaces its plan with an insurance annuity, it loses federal protection, said James Lockhart, director of the Pension Benefit Guaranty Corp.
“We’re not authorized by Congress” to back annuities, Lockhart said. “There is a good chance the regulators will be able to marshal enough assets so people get their payments.”
Executive Life was an aggressive marketer of retirement annuities during the 1980s. It was able to offer an attractive return because it expected to continue receiving high yields from its junk bonds.
Companies with surplus funds in their pension plans were able to get control of the extra cash by terminating the plans and replacing them with annuities purchased from Executive Life.
But the decline in the junk bond market dealt a blow to the insurer’s health, casting doubt on its ability to make good on the annuities.
The uncertainty has been a source of worry for Finan, the Woodland Hills widow, ever since she began reading newspaper stories on Executive Life’s problems.
“I’ve been distressed for months,” she said. Her husband retired in 1984 after serving as executive vice president of Blue Cross. He became ill in 1985, and Finan said she gave up her practice as an attorney “to be with him.” He died in 1988.
Finan’s only income is provided by the annuity and Social Security. She declined to say how much she receives each month. “I’ve got about 15 more years of mortgage payments,” she said. “This is our very first home, and I want to keep it; it’s filled with memories of Raymond.”
In 1987, when Blue Cross bought the annuity, “they wrote a letter assuring everybody the benefits wouldn’t change,” she said.
“I’m hoping they do the right thing and stand behind their people. But I don’t know, and I can’t find out any information from them,” she said. “I’m really scared, and I hate to admit it. But it’s too late for me to start over.”
Blue Cross directors will discuss the issue at a board meeting today, spokesman Michael Chee said.
At MagneTek, a Los Angeles manufacturer of electrical equipment, 500 workers and retirees of its Milwaukee plant are covered by First Executive annuities.
“Our position is that this company is responsible for every penny of these people’s benefits,” said James Mauro, counsel for the International Union of Electrical Workers, which represents the Milwaukee workers. “We have a contract that says that, and the company will be held to it.”
MagneTek refused to comment because it is in litigation with the union, a company spokesman said.
Related Story: D6
