HELP Committee Leaders Wary of Pension Advances
Sens. Tom Harkin and Lamar Alexander wrote to the National Association of Attorneys General seeking documents and information to help the committee identify American retirees targeted by lenders offering lump sum payments.
U.S. Sens. Tom Harkin, D-Iowa, and Lamar Alexander, R-Tenn., respectively the chairman and ranking member of the Senate Health, Education, Labor, and Pensions Committee, have sent a letter asking the president of the National Association of Attorneys General for documents and information that could help the committee identify retired Americans who may have been targeted by lenders offering lump-sum advance payments in exchange for a stake in the borrower's pension benefits. Some may be charging illegally high rates of interest, they warn in announcing they are opening a bipartisan HELP Committee investigation into these practices, which are known as pension sales or pension advances.
"Pensions are the bedrock of economic security in retirement for millions and millions of middle-class families. But now, it appears that there are some financial operations trying to siphon a profit off of people's retirement benefits. These unscrupulous companies are offering to buy pensions for a lump sum. That may sound like a good idea to someone who is facing financial challenges, but long term, it can actually leave them worse off down the road. I hope this bipartisan investigation will shed light on the scope of this issue and uncover the companies that are taking advantage of our nation's pensioners," Harkin said.
"There is a lot we don't know about this practice of pension purchases, and it raises concerns that investors may be preying on military veterans and retirees who are in financial difficulty and skirting laws concerning interest rates. This is the start of our investigation into the practice," Alexander said.
Their letter is addressed to Douglas Gansler, NAAG president, and asks him to "please reach out to your membership to determine if any state Attorneys General have information that would be relevant to our inquiry. Given our mutual interest in protecting the nation's retirees," they write, "we also want to make certain that your members are aware that we are here as a resource to you as well and hope we can start a collaborative process to examine whether these arrangements are being used deceptively or fraudulently, whether these arrangements violate any state or federal laws, and, if so, how to address those problems.
The HELP Committee has jurisdiction over pension issues.
"Pensions are an important component of retirement security for millions of Americans," Harkin and Alexander wrote in the letter. "They can help ensure that, after a lifetime of hard work, people are able to retire with financial independence. Pensions play a critical role in ensuring financial security at retirement, and Congress has afforded them certain unique legal protections.... Despite those protections, recent news reports indicate that some companies may be looking to take advantage of financially distressed retirees by offering lump sum payments with potentially illegally high rates of repayment interest. Some of the arrangements appear to come with extraordinarily high fees, yet it is unclear whether these fees are disclosed to retirees who might later find their long-term economic security compromised."