(May 20) The U.S. Senate has opened a probe into the increasingly controversial business of buying up and re-packaging the income streams of pensioners. The Senate Committee on Health, Education, Labor and Pensions will examine multiple aspects of the pension-buying business model. This is a follow-on to state investigations launched in the last few weeks in Massachusetts and New York, and a FINRA Investor Alert on the topic, as reported here.
One concern is the legality of acquiring such pensions to begin with, as federal law prohibits the “assignment” of former federal employees’ and veterans’ pensions. The buyers have attempted to finesse this obstacle by defining the deals as contracts. Another issue is the other side of these transactions: the subsequent re-bundling and sale of these income streams to investors. In the words of a letter from the committee, there’s a possibility that “innocent investors who may purchase the rights to the pensions believing them to be a worthy and legal investment are being misled or defrauded by the companies involved in brokering these agreements.”