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

Private Equity Giant Apollo Global Management’s Aggressive Move into Pension Buyouts Sparks Labor Union Effort to Protect Retirees

WASHINGTON--(BUSINESS WIRE)--Today, the International Brotherhood of Teamsters and hospitality union UNITE HERE announced an alliance to work together to strengthen protection of pension benefits in response to private equity’s growing encroachment into the retirement services industry.

The two unions cited the recent multi-billion-dollar pension buyout deals by Apollo Global Management’s (NYSE: APO) Athene subsidiary as the spark for the new alliance. Athene claimed the top spot in the so-called pension risk transfer (PRT) market in 2020 and 2021, assuming tens of billions of dollars of pension obligations from large corporate plans including JC Penney, Alcoa, Lockheed and Lumen Technologies.

The two International Unions plan to advocate for more robust state and federal oversight of group annuity providers, as well as updated regulatory guidance for corporate pension plan sponsors considering risk transfers. The existing guidance was developed in 1995, years before Apollo and other private equity-backed insurance companies became big players in the pension risk transfer market.

Provisions in the bipartisan RISE Act, passed in the House and pending in the Senate, would require the Department of Labor to revisit that 1995 guidance, a directive the two unions described as an encouraging first step.

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

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

Athene typically has reinsured most of its assumed pension obligations to affiliates based in Bermuda. A California-based Apollo affiliate then would sell some of the corporate and government bonds backing the pension obligations and replace them with relatively illiquid investments like collateralized loan obligations, private buyout loans, and various alternative investments. Many of these replacement investments were originated or managed by other Apollo affiliates, which resulted in additional fees paid to Apollo.

The issue has drawn attention from Senate Banking Committee Chairman Sherrod Brown, who recently requested that both the Federal Insurance Office (FIO) and the National Association of Insurance Commissioners (NAIC) look into the issue of private equity insurers in the pension buyout market and how the safety of retirees’ benefits may be affected. In the past, FIO has reported that private equity owners “may use investment strategies for their owned insurance entities that have heightened credit and liquidity risk profiles as compared 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. “They’ve been studying 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.”

Taylor says in addition to advocating for updated fiduciary guidance and more effective state and federal regulation of annuity providers, the union alliance is exploring ways to negotiate protections into union contracts that would give workers a voice when companies seek to transfer pension obligations to insurance companies.