Teamsters and UNITE HERE Alliance Launches Campaign Against Private Equity Pension Takeovers

The International Brotherhood of Teamsters and hospitality union UNITE HERE announced a new alliance in Washington on July 28, 2022, aimed at strengthening protections for pension benefits as private equity firms expand into the retirement services industry. The unions cited recent multi-billion-dollar pension buyout deals by Athene, the insurance subsidiary of Apollo Global Management (NYSE: APO), as the catalyst for the initiative. According to the release, Athene ranked first in the pension risk transfer (PRT) market in 2020 and 2021, taking on tens of billions of dollars in pension obligations from large corporate plans, including JC Penney, Alcoa, Lockheed and Lumen Technologies.

The unions plan to advocate for more robust state and federal oversight of group annuity providers, as well as updated regulatory guidance for corporate plan sponsors considering risk transfers. The current guidance was issued in 1995, well before Apollo and other private equity-backed insurers became significant players in the PRT market. Provisions of the bipartisan RISE Act, which has passed the House and awaits Senate action, would require the Department of Labor to revisit that guidance, a development the unions described as an encouraging first step.

The National Association of Insurance Commissioners (NAIC) is studying private equity-backed insurers, including their effects on workers and retirees in PRT transactions, but has so far taken a wait-and-see approach to many of the complex risks identified. Senate Banking Committee Chairman Sherrod Brown recently asked the Federal Insurance Office (FIO) and the NAIC to examine the issue and how retirees' benefit security may be affected. The FIO has previously noted that private equity owners "may use investment strategies for their owned insurance entities that have heightened credit and liquidity risk profiles."

The unions contend that thousands of retirees, including some union members, have lost ERISA rights and PBGC insurance coverage in these transactions, and that workers' retirement assets are being moved into opaque financial structures. The release describes a structure in which Athene typically reinsures most assumed obligations to Bermuda-based affiliates, while a California-based Apollo affiliate sells corporate and government bonds backing those obligations and replaces them with less liquid assets such as collateralized loan obligations, private buyout loans and other alternative investments, many originated or managed by other Apollo affiliates that generate additional fees. UNITE HERE President D. Taylor said, "We need more than slogans and study groups," adding that hundreds of thousands of workers have seen their pensions transferred to private equity-backed insurers. Beyond regulatory advocacy, the alliance is exploring negotiating protections in union contracts that would give workers a voice when companies seek to transfer pension obligations to insurers.