COMPLY-Primerica slogs through onslaught of retirement-plan cases

July 25 Thu Jul 25, 2013 11:30am EDT

July 25 (Reuters) - Primerica advisers gave Florida workers poor retirement advice, say current and former Florida public employees in a slew of legal challenges now facing the company.

But so far, the company is holding its own as it works its way through 21 securities arbitration cases and seven court cases all focused on the same issue: Public employees eligible for the State of Florida Public Retirement System say PFS Investments Inc, a Primerica Inc unit, advised them to permanently give up their rights to lifetime pension payments and switch to an alternative plan that subjected them to stock market risks.

After they made their elections, in the mid-2000s, the stock market headed south and many of their portfolios lost money. The value of their individual accounts in the new plan will never be worth what they could have collected from the pension, they say.

"We believe the cases are without merit, and we are vigorously defending them," said Mark Supic, executive vice president of media relations for Primerica, via email.

The employees behind the cases include police and corrections officers who were nearing retirement when they made that choice, said Andrew Tramont, the lawyer in Coral Gables, Florida, who is handling most of the cases. He is already representing 90 employees and expects to file cases on behalf of 100 more.

Primerica brokers targeted them, the cases allege, in the hopes that workers would transfer their accounts to Primerica when they retired and buy the company's financial products. But choosing the lifetime safety of a traditional pension made more sense, given the employees' ages and long years of service, Tramont said.

The disputes spotlight the risks of making certain retirement-planning moves at the wrong time. Many employees involved in the litigation opted for the investment plan in 2005 and 2006, shortly before markets plunged during the 2007-2008 financial crisis. That caused many clients involved in the cases to lose money and delay their retirement, Tramont said.

Even so, their legal challenges may face a tough road ahead, based on initial outcomes: Primerica won two of the first three arbitration cases, including one on July 8, dismissed in part because the claim was too old. In a third case, decided in June, arbitrators awarded an employee $187,000 - a win for the employee, but a fraction of the nearly $2.3 million in total damages she had requested. Primerica recently filed a court case to try to overturn the ruling.

Last year, a Florida state judge dismissed one of the lawsuits against Primerica after ruling the public employees filed it too late. The employees are appealing.

Tramont, who represents the employees, says he is not troubled by the outcomes, which so far seem to be going in Primerica's favor. Facts differ in every case, so "different outcomes are to be expected," he said. "But the common thread running through all of the cases is that Primerica hurt a lot of people."

A spokesman for the Florida State Board of Administration, which oversees the pension and investment plans, declined to comment on the cases.

SITTING TARGETS

Primerica's legal battles stem from a change to Florida's retirement system in 2002. It gave employees the option to switch from a traditional pension plan, in which they would receive lifetime benefits based on their salaries and years of service, or convert the value of their pension to a lump sum payment which they could invest in mutual funds and other securities offered through the state retirement system.

Long-serving employees involved in the cases blame a group of Primerica brokers and the company for inducing them to make the riskier choice by presenting it as more promising: The investment plan would generate more retirement income than the pension plan, employees say they were told. Relatives could also inherit the accounts upon the employees' deaths, an option not available through the pension plan.

The Primerica advisers, however, did not lay out the market risks the employees would be taking on, the employees say in one court complaint. They also failed to make clear that choosing the investment plan meant giving up a benefit that allowed them to collect both a paycheck and a pension check for up to five years if they continued to work past retirement age.

FIGHTING BACK

Primerica is mounting a vigorous defense, pouring $3.9 million into defending the claims during the first quarter of 2013 alone, according to its most recent public financial statement.

Florida gives its employees extensive information to evaluate their retirement plans, said Supic, the Primerica spokesman. The two plans are designed to be of equivalent economic value, he said. Furthermore, "employees who filed the cases never invested their money with the Primerica - their assets remain in (the) state-held retirement fund," Supic said.

"Moreover, many employees' retirement accounts at FRS have benefited from the most recent market rise, making their claims even more speculative," Supic said.

The company may also be trying to ward off concerns about the cases among its own investors. Tramont's firm has been promoting its services to "generate interest" in filing cases, the company said in the recent quarterly financial disclosure. Some of them could be dismissed for being too old, it said.

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