Teamsters and UNITE HERE Alliance launch campaign against private equity pension buyouts

WASHINGTON–(BUSINESS WIRE)–Today, the International Brotherhood of Teamsters and hospitality union UNITE HERE announced an alliance to work together to strengthen pension benefit protections in response to the growing intrusion of private equity into the retirement savings industry.

The two unions cited the recent multi-billion-dollar pension buyout deals by Apollo Global Management’s (NYSE: APO) Athene subsidiary as sparking the new alliance. Athene claimed the top spot in the Pension Risk Transfer (PRT) market in 2020 and 2021, taking on tens of billions of dollars in pension obligations from major corporate plans including JC Penney, Alcoa, Lockheed and Lumen Technologies.

The two international unions intend to push for stronger state and federal oversight of group pension providers, as well as updated regulatory guidance for sponsors of occupational pension plans that are considering risk transfers. The existing guidelines were developed in 1995, years before Apollo and other private equity-backed insurance companies became major players in the pension risk transfer market.

Provisions in the bipartisan RISE bill, which was passed in the House of Representatives and is pending in the Senate, would require the Labor Department to revise these 1995 guidelines, a directive the two unions said was an encouraging first step.

The National Association of Insurance Commissioners (NAIC) is also studying the problem of private equity-backed insurance companies, including their impact on workers and retirees subject to PRT deals, but has so far chosen to take a wait-and-see stance on many of the complex risks, that they have identified.

Thousands of retirees, including some union members, have lost their ERISA entitlements and PBGC insurance in these deals. The Teamsters and UNITE HERE are concerned that workers’ retirement savings are being shifted into complex financial structures that lack transparency.

Athene has typically reinsured most of its assumed pension obligations to Bermuda-based affiliates. A California-based subsidiary of Apollo would then sell some of the corporate and government bonds backing pension obligations and replace them with relatively illiquid investments such as secured loan obligations, private acquisition loans, and various alternative investments. Many of these replacement investments were initiated or managed by other Apollo subsidiaries, resulting in additional fees being paid to Apollo.

The matter has caught the attention of Senate Banking Committee Chairman Sherrod Brown, who recently called for both the Federal Insurance Office (FIO) and the National Association of Insurance Commissioners (NAIC) to address the issue of private equity Insurers are addressing the pension buyout market and how the security of pension benefits may be compromised. In the past, FIO has reported that private equity owners “can use investment strategies for their own insurance companies that have an elevated credit and liquidity risk profile relative to other market participants.”

The union initiative was prompted in part by years of inaction on the part of state insurance regulators. “We need more than slogans and study groups,” said UNITE HERE President D. Taylor. “You have been dealing with these issues for years. Meanwhile, hundreds of thousands of workers have seen their pensions handed over to private equity-backed insurance companies. The stakes of continued inaction are just too high.”

According to Taylor, the union alliance is not only advocating updated fiduciary guidance and more effective state and federal regulation of pension providers, but is also exploring ways to negotiate protections in union contracts that would give workers a voice when companies attempt to shift pension obligations to insurance companies.

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