Before its bankruptcy in 1991, Executive Life Insurance Company accepted transfer contracts from companies to pay their retirees’ pensions instead of the companies defined benefit pension plan. Employers saved money in the transfer because Executive Life offered high interest rates — which were discovered later to be backed by junk bonds – and because their retirees lost Pension Benefit Guaranty Corporation (PBGC) protection when the companies stopped paying PBGC premiums. Retirees from RJ Reynolds, Pacific Lumber suffered significant cuts in pensions after the value of Executive Life assets plummeted and Executive Life collapsed.
Twenty years after Executive Life defaulted on worker pensions, GM and Verizon helped kickstart a broader trend in corporate America, where over $300 billion in retiree assets have since been offloaded to insurance annuity providers and private equity investors.
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