CPI-U adjustment too small on AIG SPIA

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RustyShackleford
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CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

In 2007, I purchased a SPIA from AIG, via Vanguard. It pays quarterly (in Jan, Apr, Jul, Oct) and is adjusted yearly by the CPI-U. The adjustment is based on the increase in the September CPI-U figure over the previous year.

Thus, the increased payment starting in 2022 should be the 2021 payment, multiplied by the ratio of the September 2021 CPI-U to the September 2020 CPU-I. That ratio is 1.054, and thus my 2022 payment should be 5.4% higher than the 2021 payment. However, the payment I just received (for Jan 2022) is only about 1.7% higher. I'm pretty sure I'm doing the computation correctly, because I've done it every prior year and was correct within a few cents on the new payment.

Another oddity is that I usually receive my payment on the 6th (of every third month), but the current payment came on the 3rd. I'm somewhat optimistic that I'll receive the correct payment on the 6th, which would leave me wondering what the payment received on the 3rd was.

Does anyone else here have the CPI-U adjusted version of the AIG SPIA ?

I've called AIG's support center, but I've had terrible luck with them in the past (I gave up on trying to get them to change my withholding), so I'm less than optimistic that the request to "research" my payment amount will ever amount to anything.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

RustyShackleford wrote: Tue Jan 04, 2022 6:21 pm In 2007, I purchased a SPIA from AIG, via Vanguard. It pays quarterly (in Jan, Apr, Jul, Oct) and is adjusted yearly by the CPI-U. The adjustment is based on the increase in the September CPI-U figure over the previous year.

Thus, the increased payment starting in 2022 should be the 2021 payment, multiplied by the ratio of the September 2021 CPI-U to the September 2020 CPU-I. That ratio is 1.054, and thus my 2022 payment should be 5.4% higher than the 2021 payment. However, the payment I just received (for Jan 2022) is only about 1.7% higher. I'm pretty sure I'm doing the computation correctly, because I've done it every prior year and was correct within a few cents on the new payment.

Another oddity is that I usually receive my payment on the 6th (of every third month), but the current payment came on the 3rd. I'm somewhat optimistic that I'll receive the correct payment on the 6th, which would leave me wondering what the payment received on the 3rd was.

Does anyone else here have the CPI-U adjusted version of the AIG SPIA ?

I've called AIG's support center, but I've had terrible luck with them in the past (I gave up on trying to get them to change my withholding), so I'm less than optimistic that the request to "research" my payment amount will ever amount to anything.
I don’t own the product. And I’ve never even heard of it. (It sounds like a pretty sweet deal to me.) :moneybag

But here are my thoughts on how I suggest you proceed:

1. I’d review the policy, especially the schedule page and the section where it talks about payment adjustment. It’s possible that you’ve hit some type of “maximum payment increase” cap, either year by year or cumulative.

2. I’d see if a payment comes on 1/6 that makes the total January payment the amount you’d expect.

3. If things aren’t clarified by the two steps above, get in touch with the company. In addition to calling customer support, consider other methods of communication. Does AIG support secure email? Or do they offer a chat function? And does your policy information on the AIG website tell you anything?

If all else fails, you could resort to snail mail.

4. If you’re unsuccessful in getting satisfaction in step 3, then I’d escalate to the State Insurance Department of your state of residence.

I’m interested in hearing about how this turns out. Please post back when you have some results. Or feel free to private message me.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

Thanks for the suggestions.
Stinky wrote: Tue Jan 04, 2022 7:24 pm I don’t own the product. And I’ve never even heard of it. (It sounds like a pretty sweet deal to me.) :moneybag
Yeah, I thought so too. Plenty of folks offer SPIAs now with 2 or 3% annual increases, but none that are CPI-adjusted AFAIK.
1. I’d review the policy, especially the schedule page and the section where it talks about payment adjustment. It’s possible that you’ve hit some type of “maximum payment increase” cap, either year by year or cumulative.
Yeah, that occurred to me, but 1.7% is a peculiar limit. And the overall increase is about 34%.

However, I did notice that the contract doesn't spell out the September-to-September thing explicitly;maybe some bean-counter at AIG figured out a way to save bit there.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

As mentioned on the Morningstar blog, I own exactly same annuity (Vanguard-purchased, CPI-U adjusted, AIG lifetime SPIA, purchased 10 years ago). I ALSO own the same product (exactly the same specifications) that I bought about five years later--but this annuity was correctly adjusted (1.4, 5.4% adjustments for 2021 and 2022, respectively)! In other words, one is correct and the other is not !

Both of my annuities provide monthly benefits, so I've definitely received the first 2022 benefit (January). It is clearly wrong (1.7%), so no question that there is an error. And, as mentioned earlier, it was also wrong for 2021 (1.7% vs 1.4%). The fact that my CPI-U adjustment failed to update for TWO YEARS, indicates not just an "update problem", but also a remarkably failure of higher-level oversight/supervisory mechanisms with AIG.

I urge anyone having this problem to send a letter to the office of CEO at AIG ==> with a copy of a complaint to your state insurance commissioner. FWIW, I personally am very doubtful that AIG will respond otherwise, at least in any finite amount of time. They have not, so far, responded to two different inquires to their customer service center ("You will receive an answer within two business days").
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

drjbgmail wrote: Thu Jan 06, 2022 11:27 am As mentioned on the Morningstar blog, I own exactly same annuity (Vanguard-purchased, CPI-U adjusted, AIG lifetime SPIA, purchased 10 years ago). I ALSO own the same product (exactly the same specifications) that I bought about five years later--but this annuity was correctly adjusted (1.4, 5.4% adjustments for 2021 and 2022, respectively)! In other words, one is correct and the other is not !

Both of my annuities provide monthly benefits, so I've definitely received the first 2022 benefit (January). It is clearly wrong (1.7%), so no question that there is an error. And, as mentioned earlier, it was also wrong for 2021 (1.7% vs 1.4%). The fact that my CPI-U adjustment failed to update for TWO YEARS, indicates not just an "update problem", but also a remarkably failure of higher-level oversight/supervisory mechanisms with AIG.

I urge anyone having this problem to send a letter to the office of CEO at AIG ==> with a copy of a complaint to your state insurance commissioner. FWIW, I personally am very doubtful that AIG will respond otherwise, at least in any finite amount of time. They have not, so far, responded to two different inquires to their customer service center ("You will receive an answer within two business days").
Welcome to the Forum!

It sounds like AIG must have some kind of an internal procedure that's all messed up. (I'm sure that's little comfort to you.)

I agree that escalating is the right thing to do. To the CEO, who should pass it along to the underlings that do the actual work. And, equally importantly, to the Insurance Department of your state of residence.

Sorry that you're having problems. Please post back on this Forum as your situation evolves.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

Thanks Stinky ! I will definitely post back as the situation evolves. I was not really aware of either Morningstar or Boggleheads' blogs--both look very interesting. I discovered the Morningstar blog when GOOGLE'ing to see if others had problems with CPI-U adjustments at AIG.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

I'm going to check this carefully. I'm ashamed to say I never actually checked before.

I don't get any paperwork except the year-end 1099-R that breaks out how the monthly payment is calculated.

I just discovered that the Federal withholding, which I thought I had set as a percentage, has been taken out as a fixed dollar number! The state withholding has been taken out as a constant percentage.

I definitely have some homework to do so I don't want to say anything at this point.
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

I posted the fine print on inflation adjustment on a related M* thread (can't figure out how to add an image here) ...

https://community.morningstar.com/s/que ... =1&s1ext=0
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

RustyShackleford wrote: Thu Jan 06, 2022 6:28 pm I posted the fine print on inflation adjustment on a related M* thread (can't figure out how to add an image here) ...

https://community.morningstar.com/s/que ... =1&s1ext=0
I’m not seeing anything in the “fine print” that would limit the inflation adjustment that you are due for 2022.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

I captured it and then OCR-ed it. The text of the image you posted reads:
TYPE OF ANNUITY:

LIFE ANNUITY WITH INFLATION ADJUSTMENTS: We will provide annuity income to the Annuitant, beginning on the Annuity Date, for the Annuitant's entire life. Annuity income stops when the Annuitant is no longer living.

Each year on January 1st the Annuity Benefit will be adjusted for changes in the non-seasonally unadjusted Consumer Price Index U (*CPI") as published by the Bureau of Labor Statistics. The adjustment can raise or lower the Annuity Benefit for the next year, depending upon changes in CPI. However, any Annuity Benefit decrease will never reduce the payment below the Annuity Benefit shown on this Schedule page. Because of this guaranteed minimum payment level, any negative movements in CPI which are not applied to the Annuity Benefit will be used to offset future CPI increases.
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

Stinky wrote: Thu Jan 06, 2022 7:06 pm
RustyShackleford wrote: Thu Jan 06, 2022 6:28 pm I posted the fine print on inflation adjustment on a related M* thread (can't figure out how to add an image here) ...

https://community.morningstar.com/s/que ... =1&s1ext=0
I’m not seeing anything in the “fine print” that would limit the inflation adjustment that you are due for 2022.
I believe if they magically decided it should be the Feb-to-Feb increase (the inflation adjustment for 2022 is based on the Feb2020-to-Feb2021 CPI-U increase), you come up with a much lower inflation adjustment, in fact, 1.7% (if you round to one fractional digit). The aforementioned fine print (kudos or OCR'ing it !) would not preclude such legerdemain by some weasel at AGI.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

My mother has a similar AIG annuity, purchased in 2008. Thank you for this post. I will check this annuity to see if it’s being inflation-adjusted correctly.
Last edited by Leesbro63 on Fri Jan 07, 2022 7:48 am, edited 1 time in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

As nearly as I can make out, the changes in the base amount (before withholding) changed by this much each year, effective with the payment made at the end of December (i.e. there was a 1.71% increase from between the 11/20/2021 payment and the 12/31/2021 payment).

2021 +1.71%
2020 +1.71%
2019 +2.28%
2018 +2.23%
2017 +1.46%

I'm fairly sure the slightly tricky calculations I did to get from the deposits in my checking account back to the amounts before withholding are correct, because we have two different annuities and the percentage increases are identical to two places when I calculate them for each of the two annuities.

I've been fiddling around with the monthly CPI-U table and so far I can't find any way to get these numbers out of CPI, not for any of the twelve possible starting months.

I find it particularly troubling that the increase for 2021 is identical to the increase for 2020. That isn't right for any measuring month (Jan-Jan, Feb-Feb, etc.)

Feb-Feb doesn't work.
It's true that Feb 2020 to Feb 2021 is 258.676 -> 263.014 = +1.68%.
But Feb 2019 to Feb 2020 is 252.776 -> 258.676 = +2.33%.
Last edited by nisiprius on Thu Jan 06, 2022 8:25 pm, edited 1 time in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nolesrule »

Looks to me like they forgot (accidentally or otherwise) to update the years before pulling the data to get the adjustment, since the adjustment rate appears to be identical to the previous year.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

I don't believe this. I just wasted--OK, 15 minutes--composing a quality query and trying to send it to their "Annuities Service Center" via their "Email Us" page. Pressed "Submit." Literally nothing happened. I was using Safari, so I tried again using Firefox. Same result.
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Re: CPI-U adjustment too small on AIG SPIA

Post by mw1739 »

Can’t help with this specific scenario but I had to resort to my state insurance commissioner to get a refund on an AIG term life policy that I accidentally double paid.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

nolesrule wrote: Thu Jan 06, 2022 8:08 pm Looks to me like they forgot (accidentally or otherwise) to update the years before pulling the data to get the adjustment, since the adjustment rate appears to be identical to the previous year.
Part of my job during my work years was doing due diligence on the operations of other life insurers. In that role, I visited the home offices of literally dozens of life insurance companies over my career.

Hidden behind the palatial buildings, the ornate lobbies, and the plush executive suites, we found that there were dark corners in almost every company where operations were terminally screwed up. The usual reasons were system related.

Your inflation adjusted annuity policies might just reside in such a dark corner at AIG.
Last edited by Stinky on Thu Jan 06, 2022 9:58 pm, edited 1 time in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

FYI, here are the official (BLS) government figures for Sept-Sept CPI-U adjustments (not seasonally adjusted), going back to 2011. They match my actual annuity adjustments (rounded to one decimal point)--EXCEPT for 2020 and 2021. It seems to highly likely that AIG simply did not update the CPI-U adjustment after 2019, perhaps because of pandemic disruptions. I've included the BLS URL at the end of this post, to do your own comparisons.

2011 3.9%
2012 2.0%
2013 1.2%
2014 1.7%
2015 0.0%
2016 1.5%
2017 2.2%
2018 2.3%
2019 1.7%
2020 1.4%
2021 5.4%

https://www.bls.gov/regions/mid-atlanti ... _table.htm
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

I should add that the CPI-U problem may be specific to Vanguard, since my other AIG annuity (NOT purchased through Vanguard, about 5 years later) has the correct CPI-U adjustments (1.4%, 5.4%).
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

NOPE, this is all wrong--I was off by a year, not AIG.

For me, the payments are monthly and the annual adjustment takes effect on the last payment of the calendar year--end of December, 12/31/2021 this year.

It looks to me as if a) they goofed by repeating an adjustment, but... b) they are calculating September to September and c) with a year's delay ????

This is the only place on the chart that fits the sequence of adjustments for more than a year.

Image

Can it be possible that
Each year on January 1st the Annuity Benefit will be adjusted for changes in the non-seasonally unadjusted Consumer Price Index U (*CPI") as published by the Bureau of Labor Statistics. The adjustment can raise or lower the Annuity Benefit for the next year, depending upon changes in CPI.
means that the adjustment is calculated at the start of year Y--based on September through September of the previous year--but that "the next year" does not mean year Y, but year Y + 1?????

Of course the interesting thing is that all the years that inflation was jigging up and down roughly 2% per year, apparently nobody really thought to check. But when we saw our Social Security benefit jump, naturally we expected to see the annuity jump, too...
Last edited by nisiprius on Fri Jan 07, 2022 9:59 pm, edited 2 times in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

Nisiprius, I admit I got a bit lost on your last post. Like you, I was asleep on this when inflation was under 2%. Thanks to Bogleheads and this thread, I was alerted and took a look and I see that my mother has the same AIG annuity as you (it would appear). It's a monthly payment SPIA, purchased in 2008, that is supposed to adjust for "Consumer Price Index". And the payment received on Dec 30, 2021 was 1.7% higher than before. I'm kinda lost in the detail of your post, but it looks like you got 1.7% also. Can you summarize what you think is going on?

As an important aside, AIG almost went bust only a few months after purchasing this annuity in 2008. It's fairly clear, after the fact, that they must have been the best price at the time for a reason. I do recall wondering why this deal was so much better than what the other insurers were offering at the time. AIG needed the sales/cash info. Fortunately, Uncle Sam (The Fed) decided that AIG was too big to fail and this annuity worked out. But it's another warning in buying financial assets that are priced generously to the rest of the market.

One other data point to share that might be of value: This annuity was purchased through an insurance broker with no connection to Vanguard.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Horton »

nisiprius wrote: Thu Jan 06, 2022 7:53 pm
2021 +1.71%
2020 +1.71%
2019 +2.28%
2018 +2.23%
2017 +1.46%
Interesting that 2020 and 2021 are the same. Put speculation, but I wonder if they just missed the update and applied the same percentage as the prior year?
My IPS - use target date funds (except in taxable)
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

My point is that I've never tried to check the numbers before. And now that I have, I am completely baffled as to how they ever were calculated.

Here's what I think. But I have it on my to-do list to spend some quality time digging out old 1099-R's. I really hope someone will check my work because the chance of off-by-one errors, year-ends and month-ends.

[ADDED] Yes, I was off by one. There's always a problem trying to reverse-engineer a calculation if you aren't given a clear description or clear statements. One problem for me is that I was using actual checking-account deposit numbers, without any kind of monthly statement, and "undo" the withholding; and another is that the first payment of "year X" shows in my checking account dated as the last business day of December of X-1...



I think that this year's big increase in CPI led me to check the numbers for the first time. And that I found both a goof in this year's, and something much more horrifying: the annuity CPI adjustments lag CPI by fifteen months.

Social Security increases have three-month lag. That is, CPI-W jumped 5.9% from September 2020 through 2021 and accordingly the Social Security benefits gets a 5.9% boost starting in January.

What I'm observing is that what American General has paid is consistent with the idea that the increase for the year 2021 was based on inflation from September 2018 through September 2019. Not, as you might expect, the same system as September 2019 through September 2020, like Social Security. A year older.

I calculated the increases for the last five years, which were, as shown, 1.5%, 2.2%, 2.3%, 1.7%, and 1.7%.

Someone suggested that a 1.7% increase for 2022 could possibly be based on a calculation of inflation from February 2020 to February 2021.

I'm saying that can't be right, because that wouldn't explain why last year's increase was 1.7% rather than 2.3%.

I'm saying I look to see if that sequences of increases to see it matched anything in the CPI-U table. And this is what I found, slightly revised presentation of what I posted earlier:

Image

Just to be clear on a complicated little detail. In my records, what the 1099-R form gives as the total for (say) 2020, is the total of twelve equal deposits made into my checking account, the first dated by my bank as having been made 12/30/2019 and the last dated 11/27/2020. That is the payment I just received recently is dated 12/31/2021 but is consider "2022" and will be included in the 2022 1099-R, not the 2021 1099-R.
Last edited by nisiprius on Sat Jan 08, 2022 7:16 am, edited 3 times in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

nisiprius wrote: Fri Jan 07, 2022 8:59 am
I feel sorry for American General's reps, if they can in fact be reached. They are in for some very unhappy customers.
So what should we do? Should we be the ones to spend a lot of time and energy trying to fix this, in the Covid era where customer service is not great and the odds of getting their attention are low? Should we wait and hope that someone else does this for us? Should we write to our state insurance commissioners, who also are Covid plagued and probably not operating efficiently?
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

What should we do? Beats me.

I don't think you have soaked in the full horror, if I'm right. But once again I might have screwed up. PLEASE check me, someone.

Added: I did screw up, I was off by a year.

The increase for 2022 is +1.7%. The CPI change September 2020-2021 was +5.4%. But the CPI change September 2019-2020 was +1.4%.

If I'm right, American General will agree there was a mistake, but their viewpoint will be, not that they should have boosted payments by +5.4%, but that they should only have boosted them by 1.4%. Because of a 15-month lag which apparently nobody ever noticed.

But as I say I need to spend some quality time in the file drawer with the old 1099-R's.

The good news is that it looks like a widespread glitch, so what happens probably isn't going to depend on what individuals do. The bad news is that if and when American General gets around to doing anything, what they may try to do will be to claw back some money. Maybe obfuscate the deal by leaving this year's payments alone and then making next year's increase 5.1% instead of 5.4%.

A curious question is how has the fifteen-month delay affected policyholders? It's probably close to zero net over longish periods of time since inflation has been fairly steady. American General built in a goody for themselves in the form of a year's delay or cushion should inflation take off. But it's only a delay, policyholders will benefit if and when inflation ever falls.

I can muster up a lot of indignation. I just looked at the policy itself and I'm darned if I see where it spells out just how the calculation is done. I think the 15-month lag is secret, or hidden behind a unexpected interpretation of the word "next."

So, here is my prediction. Just for fun. And assuming that I have not screwed up and am right about the 15-month lag.

1) What happens will be independent of what I do, or whether I do anything at all. 2) I will not achieve anything by contacting American General except to get furious, as the chances that the representative will understand what I am spluttering, or will have anything meaningful or intelligent to contribute will be small. The best I can hope for is that someone will record my policy numbers as someone who's been affected. I have to do it, but I'll wait until I'm feeling mellow. 3) It will take American General a while to figure out what has happened and decide what to do. 4) My guess is that they'll let the 1.7% ride and shave 0.3% off next year's adjustment. Their IT system probably can't do anything more flexible than input a single adjustment number and then send twelve equal payments for a year. 5) They'll send out a bland and unhelpful piece of mail with gobblegook explaining why we should be happy that they aren't trying to claw back the 0.3%, and that we should lick our chops over the fat increase we'll get next year. 6) Later this year I'll get a mass mailing from a law firm inviting me to join a class action suit. 7) Sometime years later when I least expect it, I'll get paid a settlement in the low two digits.

Whether American General changes their calculation schedule to match Social Securities, a three-month lag rather than a fifteen-month lag I wouldn't even dare to guess.
Last edited by nisiprius on Fri Jan 07, 2022 10:01 pm, edited 1 time in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

I've been making somewhat-smug postings in the forum for years in the forum along the lines of "not if you buy a CPI-linked SPIA." (Which I don't think you can get any more). Well, look--I still think it was a good idea, money is still getting paid into my checking account and everything, but... jeez... insurance companies. :annoyed

I'm very much afraid that I've even said that unlike variable annuities, SPIAs are simple products with the full details being presented plainly on half a page. Plain. Simple. :annoyed
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Iorek
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Re: CPI-U adjustment too small on AIG SPIA

Post by Iorek »

This seems like the kind of thing some financial/consumer affairs journalist would be interested in, if there are any of those left.
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Re: CPI-U adjustment too small on AIG SPIA

Post by HueyLD »

I am still unable to find how AIG calculates inflation rates. It appears that the contract is silent for the time frame. In other words, is the annual inflation rate based on Jan-Jan, Feb-Feb, etc?

It makes no sense that AIG is free to pick the timeframe by choosing the lowest inflation 12 rolling months.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

Nisiprius,

I appreciate your attempts to figure out what's going on. I reread our contract. It says nothing about 15 month lags, etc. Because the contract isn't specific, it implies that the annuity CPI will adjust annually, to the CPI change of the most recent year. I believe that a jury would conclude that, AT MOST, the adjustment should be done with no more than a 3 month lag, like Social Security, which is still a reasonable standard.

I honestly am not intelligent enough to understand the "weeds" that you post from before, but your track record is excellent so I don't doubt that what you post has value. That being said, sometimes the simplest answer is the answer. (Isn't that someone's axiom?) It would appear to me that this year's 1.7% increase was the result of someone just blindly doing what was done last year. I think what I will do is write an old fashioned letter, perhaps with a "carbon copy" to the state Insurance Commissioner (to, maybe, get their attention). And sit back and hope that either my letter or a bunch of OTHER angry callers will get their attention to fix this. Because annuities can last for years and years, fixing this error is important due to the cumulative effect.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

HueyLD wrote: Fri Jan 07, 2022 10:13 am I am still unable to find how AIG calculates inflation rates. It appears that the contract is silent for the time frame. In other words, is the annual inflation rate based on Jan-Jan, Feb-Feb, etc?

It makes no sense that AIG is free to pick the timeframe by choosing the lowest inflation 12 rolling months.
Agreed. See my post, just above, for my rationale why a 3 month lag (to mimic the method Social Security uses) should be the max lag.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

NISIPRIUS

You're making it much too complicated; it's simple:

1) The Sept-Sept CPI-U adjustment, received about January 1st this year, refers to the Sept 2020-Sept 2021 period in your chart. (Making Sept-2021 the end point for adjustment, gives AIG time to update their system and allows for BLS revisions). For example, your January 2021 benefit should reflect a 5.4% increase (the Sept 2020 to Sept 2021 increase). My ACTUAL benefit was 1.7%--which is clearly wrong, not even close. Period. End of story.

2) What can you do? As mentioned several times on this blog and at Morningstar: Write a letter of complaint to the "Office of the CEO" at AIG, enclosing a letter to your state department of insurance describing the problem. If you want, try enclosing a complaint also to the federal Consumer Financial Protection Bureau, just to make the point that you're serious.

3) If you did not purchase your annuity through Vanguard, you may not be affected. (I have two CPI-U SPIAs, and ONLY the one purchased through Vanguard is affected. The other annuity was correct for 2020 and 2021 (1.4%, 5.4% COLAs)

FWIW, I've already complained to the AIG department responsible and will update people on any response (or lack thereof). I'm not optimistic.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

Leesbro63 wrote: Fri Jan 07, 2022 10:19 am I think what I will do is write an old fashioned letter, perhaps with a "carbon copy" to the state Insurance Commissioner (to, maybe, get their attention). And sit back and hope that either my letter or a bunch of OTHER angry callers will get their attention to fix this. Because annuities can last for years and years, fixing this error is important due to the cumulative effect.
I think that your proposed actions are just fine and appropriate. Hopefully someone in a position of authority at AIG will recognize that there is a problem and fix it.

If you don’t get satisfaction - this is the kind of thing that gives rise to class action litigation. The “class” is probably pretty large and well defined, and the “damage” can be easily calculated.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
Leesbro63
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

drjbgmail wrote: Fri Jan 07, 2022 10:24 am NISIPRIUS

You're making it much too complicated; it's simple:

1) The Sept-Sept CPI-U adjustment, received about January 1st this year, refers to the Sept 2020-Sept 2021 period in your chart. (Making Sept-2021 the end point for adjustment, gives AIG time to update their system and allows for BLS revisions). For example, your January 2021 benefit should reflect a 5.4% increase (the Sept 2020 to Sept 2021 increase). My ACTUAL benefit was 1.7%--which is clearly wrong, not even close. Period. End of story.

2) What can you do? As mentioned several times on this blog and at Morningstar: Write a letter of complaint to the "Office of the CEO" at AIG, enclosing a letter to your state department of insurance describing the problem. If you want, try enclosing a complaint also to the federal Consumer Financial Protection Bureau, just to make the point that you're serious.

3) If you did not purchase your annuity through Vanguard, you may not be affected. (I have two CPI-U SPIAs, and ONLY the one purchased through Vanguard is affected. The other annuity was correct for 2020 and 2021 (1.4%, 5.4% COLAs)

FWIW, I've already complained to the AIG department responsible and will update people on any response (or lack thereof). I'm not optimistic.
I agree that Nisiprius might be making this too complicated. And my mother's annuity was purchased through an insurance broker, having nothing to do with Vanguard, but she has the exact same problem that you do.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

Stinky wrote: Fri Jan 07, 2022 10:29 am
Leesbro63 wrote: Fri Jan 07, 2022 10:19 am I think what I will do is write an old fashioned letter, perhaps with a "carbon copy" to the state Insurance Commissioner (to, maybe, get their attention). And sit back and hope that either my letter or a bunch of OTHER angry callers will get their attention to fix this. Because annuities can last for years and years, fixing this error is important due to the cumulative effect.
I think that your proposed actions are just fine and appropriate. Hopefully someone in a position of authority at AIG will recognize that there is a problem and fix it.

If you don’t get satisfaction - this is the kind of thing that gives rise to class action litigation. The “class” is probably pretty large and well defined, and the “damage” can be easily calculated.
To be fair, I can't imagine it will ever get to that. I suspect this is just an honest (yes, believe it or not) error. Mainly because the 1.7% is exactly the same as the prior year increase. The key will be getting someone in authority to "wake up and tune in" to this. I'm not cynical enough to think that once that happens, they won't fess up and fix it.
Last edited by Leesbro63 on Fri Jan 07, 2022 10:40 am, edited 1 time in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

I agree that the stance in communicating with American General or anyone else should be that the "correct' adjustment for 2022 should be based on the same time period Social Security uses, September 2020-September 2021, and should be 5.4% rather than 1.7%.

No point in leaning over backwards to justify the unjustifiable.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

I agree that it's probably an innocent mistake (more exactly, incompetence), perhaps related to pandemic personnel disruptions. But the threat of a class-action lawsuit lurking in the background, not to mention negative publicity, should hopefully be a motivator.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

Well, just for laughs I'm going to try a "letter to the CEO."
Peter Zaffino, Chairman and CEO
American International Group, Inc.
175 Water Street
New York, NY 10038

Dear Mr. Zaffino

I request that American General pay me $xxx.xx, as an adjustment for an apparent error in the calculation of the CPI adjustment on policies VG######## and VG########. Based on the last monthly payments received, dated 12/31/2021, the error will result in total shortfalls of $yyy.yy and $zzz.zz respectively, for the 2022 payment year.
The rest of the letter details the calculation, and an attachment quotes the text from the policy and reproduces the CPI table, showing a September-to-September increase of +5.39%.

The problem is I can't in good conscience send it without making at least a good-faith effort to contact the "Annuity Service Center," so I'm waiting on hold, 30 minutes into an "expected waiting time of 20 minutes." Every minute an automated message urges me, instead of waiting, to go online at https://www.aig.com/annuities where I can "manage my account online" but when I go there and try to "Register Now" it tells me that
The information you provided cannot be verified. Please check your responses and try again or call the Annuity Service Center for further assistance.
I hate it when a phone system tells me to go online and the online system tells me to phone.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

You can also try emailing the AIG service center, in addition or as an alternative to telephoning. Although others have had problems (system didn't work) I was able to use it this week. Here's the URL:

https://www.lifeandretirement.aig.com/i ... rvice-desk

There is a small blue tab in the right lower corner of the "fixed annuities" pane.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

I should add that you do NOT need to login to use the AIG service center email function described in my previous post.
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

FWIW, I get my payments quarterly - in Jan, Apr, Jul, and Oct.

Every since I started this annuity in 2007, my payment increases have been VERY close to that predicted by the Sept-to-Sept increase in CPI-U (specifically, CPI-U increase from Sept of year i-1 to Sept of year i, defines payment increase from October of year i to January of year i+1).
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Re: CPI-U adjustment too small on AIG SPIA

Post by GAAP »

nisiprius wrote: Thu Jan 06, 2022 7:07 pm I captured it and then OCR-ed it. The text of the image you posted reads:
TYPE OF ANNUITY:

LIFE ANNUITY WITH INFLATION ADJUSTMENTS: We will provide annuity income to the Annuitant, beginning on the Annuity Date, for the Annuitant's entire life. Annuity income stops when the Annuitant is no longer living.

Each year on January 1st the Annuity Benefit will be adjusted for changes in the non-seasonally unadjusted Consumer Price Index U (*CPI") as published by the Bureau of Labor Statistics. The adjustment can raise or lower the Annuity Benefit for the next year, depending upon changes in CPI. However, any Annuity Benefit decrease will never reduce the payment below the Annuity Benefit shown on this Schedule page. Because of this guaranteed minimum payment level, any negative movements in CPI which are not applied to the Annuity Benefit will be used to offset future CPI increases.
I think this may the cause.

I see negative September-to-September inflation changes in 2009, 2015, 2018. If they're carrying over the decrease, you may see effects for a couple of years or more.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

RustyShackleford wrote: Fri Jan 07, 2022 2:58 pm FWIW, I get my payments quarterly - in Jan, Apr, Jul, and Oct.

Every since I started this annuity in 2007, my payment increases have been VERY close to that predicted by the Sept-to-Sept increase in CPI-U (specifically, CPI-U increase from Sept of year i-1 to Sept of year i, defines payment increase from October of year i to January of year i+1).
In other words: the annual CPI increase is measured September to September and takes effect almost instantly?
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Re: CPI-U adjustment too small on AIG SPIA

Post by GAAP »

GAAP wrote: Fri Jan 07, 2022 3:10 pm
nisiprius wrote: Thu Jan 06, 2022 7:07 pm I captured it and then OCR-ed it. The text of the image you posted reads:
TYPE OF ANNUITY:

LIFE ANNUITY WITH INFLATION ADJUSTMENTS: We will provide annuity income to the Annuitant, beginning on the Annuity Date, for the Annuitant's entire life. Annuity income stops when the Annuitant is no longer living.

Each year on January 1st the Annuity Benefit will be adjusted for changes in the non-seasonally unadjusted Consumer Price Index U (*CPI") as published by the Bureau of Labor Statistics. The adjustment can raise or lower the Annuity Benefit for the next year, depending upon changes in CPI. However, any Annuity Benefit decrease will never reduce the payment below the Annuity Benefit shown on this Schedule page. Because of this guaranteed minimum payment level, any negative movements in CPI which are not applied to the Annuity Benefit will be used to offset future CPI increases.
I think this may the cause.

I see negative September-to-September inflation changes in 2009, 2015, 2018. If they're carrying over the decrease, you may see effects for a couple of years or more.
Correction, negative in 2009 and 2015 -- I had a typo in 2018.

Code: Select all

Year	Sept. CPI-U	Change
2007	208.49	
2008	218.783	4.94%
2009	215.969	-1.29%
2010	218.439	1.14%
2011	226.889	3.87%
2012	231.407	1.99%
2013	234.149	1.18%
2014	238.031	1.66%
2015	237.945	-0.04%
2016	241.428	1.46%
2017	246.819	2.23%
2018	252.439	2.28%
2019	256.759	1.71%
2020	260.28	1.37%
2021	274.31	5.39%

Data from: https://data.bls.gov/pdq/SurveyOutputServlet

Data extracted on: January 7, 2022 (3:39:14 PM)
CPI for All Urban Consumers (CPI-U)

Series Id: CUUR0000SA0
Not Seasonally Adjusted
Series Title: All items in U.S. city average, all urban consumers, not seasonally adjusted
Area: U.S. city average
Item: All items
Base Period: 1982-84=100
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

I can’t see how negative inflation from 2009 and 2015 is involved.

The key clue, to me, is the fact that the percentage increase is EXACTLY the same as the prior year. Someone, perhaps working at home without oversight, pushed some “repeat as last year” button.

The goal now is to get the attention of someone there who understands what SHOULD have happened.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

GAA:

Not sure how you are deriving/extracting your CPI-U figures, but they are almost certainly not correct. Your figures do not match:

1) BLS figures presented on the BLS website: https://www.bls.gov/regions/mid-atlanti ... _table.htm (second table, "Percent change from 12 months ago"). Among other things, there are no negative adjustments for the period 2011 through 2021.

2) Your figures do not match the actual CPI-U adjustments provided for my annuity over the last 10 years. By contrast, the above BLS source matches PERFECTLY (to one decimal point).

3) Any CPI-U adjustment logically would be provided immediately to the next (positive) year--not spread out over several years or or suddenly show up in 2020 and 2021.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

GAAP:

Apologies, your table is correct: When you round to one-decimal place it matches the BLS table I quoted. In particular, -0.04% rounds to 0%.

HOWEVER, I purchased my annuity in 2010, so the only negative value in your series is -0.04%--a tiny amount which would not reduce a 5.4% CPI-U to 1.7%. More importantly, the 2020 CPI-U error resulted in TOO MUCH of an adjustment (1.7% vs 1.37%)--not a reduction ! Clearly, AIG has made an adjustment error (s).

And, as noted, any corrections would logically be done in the next year--not spread out or suddenly imposed in 2020 or 2021.
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Re: CPI-U adjustment too small on AIG SPIA

Post by GAAP »

Well, I suppose if you're an insurance company making errors, you might as well compound them... Oops! Sorry! :twisted:
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

Brief summary of my efforts to date, and tips for contacting AIG about this CPI-U problem:

1) After emailing the AIG "Annuity Service Center" today, I was told to call their customer service line 1-800-424-4990, which I did. There I was told they have "no record" of my policy. After further discussion (and 40 minute hold) we determined that my records are at a different AIG department ("life insurance") rather than the AIG "annuity" department".

2) Bottomline: If your annuity is similar to mine, don't bother contacting the "Annuity Service Center". Instead, contact the "life insurance department" (877 299-1724). The latter department also has a customer service email, which I have not tried: annuity.services@aig.com
Be forewarned that this department's telephone customer service representatives are located outside the U.S and that in 2 of 3 times I've called, the VOI connection was horrible--in one case almost unusable.

3) Upon calling this new ("life insurance") number (877 299-1724), I was told that my two previous calls have been noted and a request has been submitted to their "processing department". They are just waiting for the processing department to respond. However, at their suggestion, an "expedite" request has been placed to the processing department, as of today (1/7).

4) I would suggest that anyone else affected by this (problem both call and email the above depart (877 299-1724; annuity.services@aig.com). The more people hassling them and submitting requests, the more likely the gnomes in the "processing department" will take this seriously. Or not.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

drjbgmail wrote: Fri Jan 07, 2022 6:28 pm Brief summary of my efforts to date, and tips for contacting AIG about this CPI-U problem:

1) After emailing the AIG "Annuity Service Center" today, I was told to call their customer service line 1-800-424-4990, which I did. There I was told they have "no record" of my policy. After further discussion (and 40 minute hold) we determined that my records are at a different AIG department ("life insurance") rather than the AIG "annuity" department".

2) Bottomline: If your annuity is similar to mine, don't bother contacting the "Annuity Service Center". Instead, contact the "life insurance department" (877 299-1724). The latter department also has a customer service email, which I have not tried: annuity.services@aig.com
Be forewarned that this department's telephone customer service representatives are located outside the U.S and that in 2 of 3 times I've called, the VOI connection was horrible--in one case almost unusable.

3) Upon calling this new ("life insurance") number (877 299-1724), I was told that my two previous calls have been noted and a request has been submitted to their "processing department". They are just waiting for the processing department to respond. However, at their suggestion, an "expedite" request has been placed to the processing department, as of today (1/7).

4) I would suggest that anyone else affected by this (problem both call and email the above depart (877 299-1724; annuity.services@aig.com). The more people hassling them and submitting requests, the more likely the gnomes in the "processing department" will take this seriously. Or not.
That’s excellent information. Thanks for posting.

Just to clarify - the “Life insurance department” that you suggest reaching out to has an email address of “annuity.services@aig.com”? If so, that’s beyond bizarre……
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

Yes I had the same question about the customer service email address (annuity.services@aig.com). Because of this, I asked them (the "life insurance" department person) to confirm, which they did. Strange; seems possibly yet another error.
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