Metropolitan Insurance Company's Group Annuity

The Group Annuity is that type of coverage under which an employer makes provision for retirement incomes for his employees through an insurance contract. In most cases, the cost is borne on a cooperative basis by the employer and employees, although in some instances the employer pays the entire cost.

Only during the following 20 years had many employers and employees developed a clear recognition that retirement plans involve costs of very substantial magnitude which should be met by funding during the active working years of the employees. Without such advance provision the out of pocket disbursements increase steadily over the years, until a point may be reached at which the payments become a burden and it may become necessary to discontinue or to greatly curtail the plan.

Characteristically, the Metropolitan was the pioneer in developing practical and sound methods by which a life insurance company could underwrite employee retirement. This pioneer work, which started about 1921, required much experimentation, study, and consultation with employers, as well as constant close collaboration of the Group and Actuarial Divisions. As a result there emerged a basis of operation which has met the needs and desires of employers and employees and has become an accepted method of underwriting retirement plans on the Group principle.

Contributing to this result were James E. Kavanagh, head of the Group Division, and Ingalls Kimball, who in the fall of 1922 headed a new unit organized for the sole purpose of developing Group Annuity plans acceptable to industry. There were many technical and actuarial problems to be solved, and to this phase of the work Edwin C. McDonald, Vice-President in Charge of the Canadian Head Office, the late James D. Craig, Actuary and Reinhard A. Hohaus, Associate Actuary, devoted much of their time and talents.

Under the typical Group Annuity contract offered by the Company, both employees and employers made contributions during the employee's active service. In most cases the annuity became payable at age 65, though arrangements could be made for postponing retirement until a later age, as well as for "optional" retirement at some earlier age, or for normal retirement ages other than 65 (such as 60 for women). At an employee's death the total amount contributed (with or without interest, depending on the terms of the plan) was paid to his beneficiary, less any retirement income already paid to him.

On withdrawal the employee could receive the total contributions, or take a Paid up Annuity based on these contributions. Most plans provided that if an employee that met certain specified conditions, such as a minimum period of years as contributor, elected the paid up option, the amount of the annuity was based on the employer's contributions as well as his own.

The Metropolitan was the pioneer in developing practical and sound methods by which a life insurance company could underwrite employee retirement. This work, which began in 1921, required much experimentation, study, and consultation with employers.