The Markets April 24, 2019

Avery Dennison Transferring $750M in Pension Obligations to AIG

The agreement covers 8,500 retirees, beneficiaries and deferred and active members.

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Avery Dennison Corporation has signed an agreement to transfer $750 million in pension obligations to American General Life Insurance Company, part of AIG’s life and retirement business. The deal covers 8,500 retirees, beneficiaries and deferred and active members.

Avery Dennison is conducting the pension risk transfer by purchasing AIG annuities, with AIG assuming the future annuity payments to the 8,500 in Avery Dennison’s plan, commencing April 1. This settlement resulted in $447 million of pretax charges, partially offset by related tax benefits of $180 million.

“We are pleased Avery Dennison selected AIG to manage the retirement security of its retirees, and we are committed to providing them with a smooth transition,” says Ali Vaseghi, chief operating officer, institutional markets.
Compliance April 23, 2019

Council Finds Noncompliance With ERISA Fidelity Bond Rules

For this reason, the ERISA Advisory Council is recommending that the Department of Labor relaunch the updated rules it published in Field Assistance Bulletin (FAB) 2008-04.

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Citing evidence of noncompliance with the Employee Retirement Income Security Act (ERISA) requirement that retirement plans to be covered by fidelity bonds, the ERISA Advisory Council is recommending that the Department of Labor relaunch the updated rules it published in Field Assistance Bulletin (FAB) 2008-04, this time focusing directly on plan sponsors and other plan officials and plan service providers as the targeted audience.

In its report to Secretary of Labor R. Alexander Acosta, the Council says the instances of noncompliance are concentrated in the small plan market, and it attributes this to a general underdeveloped awareness and misunderstanding of the fidelity bond rules by sponsors of small plans and the commercial service providers that serve the small plan market.

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The Council suggests that the best vehicle for this new publication would be an Interpretive Bulletin because it would be published in the Code of Federal Regulations and not require a full Administrative Procedure Act process that a revision of the current Temporary Regulations would entail.

The Council also recommends that the DOL add a “Fidelity Bond Summary” to its sub-regulatory guidance and include a sample in its report.  “Such a summary would serve to demystify fidelity bonds for purchasers, by explaining the basic requirements, and by helping them to distinguish among the various insurance products that are typically sold in conjunction with fidelity bonds, but that are not subject to statutory mandates under ERISA or the Department’s rules and regulations,” the report says.

The Council is not recommending any amendments to ERISA or regulations concerning fidelity bonds.

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