CPI-U adjustment too small on AIG SPIA

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RustyShackleford
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

nisiprius wrote: Fri Jan 07, 2022 3:13 pm In other words: the annual CPI increase is measured September to September and takes effect almost instantly?
Correct.
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »


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. If they're carrying over the decrease, you may see effects for a couple of years or more.
Nice try, but no. That doesn't explain it (for me at least)

1. What they're saying is that the benefit would never go below the initial payment (not the previous year's payment).
2. My payment did indeed go down, from from 2008 to 2009, and from 2014 to 2015, exactly matching the Sept-to-Sept decrease in CPI-U.
3. The downward percentage for those two years totals 1.33%, nowhere near the shortfall many of us are seeing this year.
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Re: CPI-U adjustment too small on AIG SPIA

Post by GAAP »

I think I will avoid AIG for any future annuity purchases, should I desire them.
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

Leesbro63 wrote: Fri Jan 07, 2022 4:04 pm 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.
This was not the case for me. My increase in 2020 (over 2019) was the correct 1.37%.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

I decided to write an old fashioned letter and mail it via old fashioned USPS. We had a change of address last summer, and I had a quick response and action when writing to the address here (posted for others to use). This is where I'll send my letter. I'll give them 45 days (ish) and escalate (not sure how, yet, maybe the Insurance Commissioner) if I don't get a result.

American General Life Insurance Company
Annuity Service Center
PO Box 2708
Amarillo, TX 79105-2708
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

First, a big mea culpa. At this point I'm almost sure that I messed up when I suggested that in my annuity I was seeing 15-month, rather than a 3-month delay in making the CPI adjustments. Sorry to have posted misinformation and to have alarmed anyone. I now think the adjustment is calculated September-to-September, like Social Security but CPI-U rather than CPI-W, and takes effect in the monthly payments three months later.

Just to add to the list of "so-far-unverified contact possibilities" I notice that the annual letters I get stating the "fair market value" of the annuity come from "Annuity Service Center, P.O. Box 1277, Wilmington, DE 19899-1277 and invite me to call "our Client Care Center" at 1-877-299-1724.

Added: I just notice that this is the same number printed at the top of the 1099-R forms.

Yesterday I spent roughly fifty minutes on hold--first at 800-225-5244 where I eventually spoke to someone who could find no record of my annuities and transferred me to 800-448-2542, which is "retirement services." Based on the website it seemed utterly irrelevant, looked like it's for 401(k) participants, and after maybe 20-25 minutes I gave up and just hung up.

I mailed a paper letter to the CEO. Next week when I'm feeling mellow I'll try at least one phone call.

I noticed that the original paperwork says
GROUP POLICY HOLDER: The Vanguard Group, Inc.
GROUP POLICY NUMBER: RGA-####
CERTIFICATE NUMBER: VG########
and next phone call I'll make a point of mentioning "RGA-####." Although I fear that will just get me into an AIG<->Vanguard runaround.

I've received no annuity notices or paperwork with the Vanguard name on them since 2007. All of it has been from AIG, from a surprisingly varied assortment of address and names ("AIG Life Insurance Company" decided it was better marketing to revert to their pre-AIG name of "American General").
Last edited by nisiprius on Sat Jan 08, 2022 2:56 pm, edited 1 time in total.
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

Leesbro63 wrote: Sat Jan 08, 2022 9:15 am I decided to write an old fashioned letter and mail it via old fashioned USPS ...
I've heard that writing an actual letter tends to get companies' attention, because it's so rare.

Would you mind sharing the text of your letter, so the rest of us can more easily do the same ?
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

RustyShackleford wrote: Sat Jan 08, 2022 1:50 pm
Leesbro63 wrote: Sat Jan 08, 2022 9:15 am I decided to write an old fashioned letter and mail it via old fashioned USPS ...
I've heard that writing an actual letter tends to get companies' attention, because it's so rare.

Would you mind sharing the text of your letter, so the rest of us can more easily do the same ?
Sure...I kept it very simple:

January 7, 2022

American General Life Insurance Company
Annuity Service Center
P.O. Box 2708
Amarillo, TX 79105-2708

Re: Annuity SPIAXXXXXX

Dear AIG Annuity Representative,

The 2022 inflation adjustment (increase in my monthly annuity payment received) for the above referenced annuity was much lower than the CPI stated rate of inflation. I believe there is an error…it appears that the percentage increase was the same as for the prior year. I suspect someone forgot to put in the new calculation. Please correct and/or advise as soon as possible.

Sincerely,
Mother of Leesbro63
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

NISIPRIUS:

<<Yesterday I spent roughly fifty minutes on hold--first at 800-225-5244 where I eventually spoke to someone who could find no record of my annuities>>

The correct number IS: 877 299-1724 ("Life Insurance" department). See my earlier posting.

FWIW, I had the same experience as you did with the "annuity center": I was told they had no record. But when I called the life insurance number, they had no trouble finding it and have submitted a request to have things fixed (don't hold your breath). In any case, I do think that a letter to the office of the CEO is a good idea, in addition to calling.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

drjbgmail wrote: Sat Jan 08, 2022 9:41 pm...The correct number IS: 877 299-1724 ("Life Insurance" department)...
Answered the phone in perhaps ten minutes, had my records, seemed to understand what I was saying, said they would follow up.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

nisiprius wrote: Mon Jan 10, 2022 1:51 pm
drjbgmail wrote: Sat Jan 08, 2022 9:41 pm...The correct number IS: 877 299-1724 ("Life Insurance" department)...
Answered the phone in perhaps ten minutes, had my records, seemed to understand what I was saying, said they would follow up.
Let us know if/when they do follow up.

It will be interesting to see how long it takes for them to identify this obvious error in procedures and/or calculations.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

A blast from the past. This has happened before, but the last time it was in my favor. Anyone else remember this?

In 2014 I got a letter saying this, in part:
April 14, 2014
...As a result of a recent audit of our files, we discovered that the annual inflation adjustment for 2014 was calculated incorrectly which resulted in an overpayment to you.

Effective January 1, 2014, the Consumer Price Index U ("CPI"*) rate that should have been applied to payments in 2014 was 1.18%. However, the rate that your payment increased by was 1.99% which resulted in an overpayment to you. We will not be requesting reimbursement of the overpayment and future payments will reflect the correct amount. Your corrected payment amount, beginning 5/1/2014, will be [dollar amount]

If we can be of any further assistance in this matter, please contact our Customer Service Center by telephone, Monday through Friday, 8:00 a.m. to 5:00 p.m. Eastern Time, at 1-877-299-1724 or by email at ImmediateAnnuity@AmericanGeneral.com
Stinky wrote:
Stinky wrote: Mon Jan 10, 2022 1:55 pmIt will be interesting to see how long it takes for them to identify this obvious error in procedures and/or calculations.
Apparently three or four months, last time!
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

I'd appreciate confirmation from cool heads. Is this correct?

As nearly as I can make out, my annuity increased payouts the same amount, about 1.7%, three years in a row:

a) At the start of 2020,
b) At the start of 2021, and
c) At the start of 2022 (monthly deposit dated 12/31/2021).

Based on CPI changes from September to September,

a) The 1.7% increase for 2020 was correct,
b) The 1.7% increase for 2021 was too much and should have been 1.4%,
c) The 1.7% increase for 2022 (October 2021 for Rusty Shackleford) was too little and should have been 5.4%.

So an error was made twice, two years in a row. Too much for the year 2021, not enough for the year 2022.
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Re: CPI-U adjustment too small on AIG SPIA

Post by neurosphere »

nisiprius wrote: Wed Jan 12, 2022 10:39 am So an error was made twice, two years in a row. Too much for the year 2021, not enough for the year 2022.
Yikes, yet another thing to add the list of things I'm anxious about now, for issues which could affect me 20 years from now.

But I good lesson for when I (or someone I know) purchases a product with an inflation component: Get an explicit inflation calculation method in advance and double check ever year. :annoyed
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes".
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

nisiprius wrote: Wed Jan 12, 2022 10:39 am I'd appreciate confirmation from cool heads. Is this correct?

As nearly as I can make out, my annuity increased payouts the same amount, about 1.7%, three years in a row:

a) At the start of 2020,
b) At the start of 2021, and
c) At the start of 2022 (monthly deposit dated 12/31/2021).

Based on CPI changes from September to September,

a) The 1.7% increase for 2020 was correct,
b) The 1.7% increase for 2021 was too much and should have been 1.4%,
c) The 1.7% increase for 2022 (October 2021 for Rusty Shackleford) was too little and should have been 5.4%.

So an error was made twice, two years in a row. Too much for the year 2021, not enough for the year 2022.

2018 $xxxx.xx (From Form 1099-R)
2019 $xxxx.xx + 2.28% of the 2018 number (From Form 1099-R)
2020 $xxxx.xx + 1.71% of the 2019 number (From Form 1099-R)
2021 $xxxx.xx + 1.71% of the 2020 number (12 payments totaled this)
2022 $xxxx.xx + 1.71% of the 2021 number (12 times the new January payment received at the end of Dec 2021 for Jan 2022)

So, yes, our numbers appear to agree with your in that there was exactly a 1.71% increase three years in a row.

That being said, it's odd that an error would go on that long without someone catching it. Which implies that there is more to this story that we haven't teased out yet.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

Leesbro63 wrote: Wed Jan 12, 2022 11:16 am
nisiprius wrote: Wed Jan 12, 2022 10:39 am I'd appreciate confirmation from cool heads. Is this correct?

As nearly as I can make out, my annuity increased payouts the same amount, about 1.7%, three years in a row:

a) At the start of 2020,
b) At the start of 2021, and
c) At the start of 2022 (monthly deposit dated 12/31/2021).

Based on CPI changes from September to September,

a) The 1.7% increase for 2020 was correct,
b) The 1.7% increase for 2021 was too much and should have been 1.4%,
c) The 1.7% increase for 2022 (October 2021 for Rusty Shackleford) was too little and should have been 5.4%.

So an error was made twice, two years in a row. Too much for the year 2021, not enough for the year 2022.

2018 $xxxx.xx (From Form 1099-R)
2019 $xxxx.xx + 2.28% of the 2018 number (From Form 1099-R)
2020 $xxxx.xx + 1.71% of the 2019 number (From Form 1099-R)
2021 $xxxx.xx + 1.71% of the 2020 number (12 payments totaled this)
2022 $xxxx.xx + 1.71% of the 2021 number (12 times the new January payment received at the end of Dec 2021 for Jan 2022)

So, yes, our numbers appear to agree with your in that there was exactly a 1.71% increase three years in a row.

That being said, it's odd that an error would go on that long without someone catching it. Which implies that there is more to this story that we haven't teased out yet.
I expect that there’s an error somewhere deep in the bowels of AIG.

Some functionary named Stevie or Susie inadvertently made the one year increase repeat year after year. They pasted the increase percentage for one year to apply for all future years. It’s probably in some old computer spreadsheet or system that isn’t fully understood by current IT staff.

The challenge for Bogleheads is to jostle AIG enough so somebody is actually motivated to track down this error and fix it.

I’ve seen this kind of thing happen in life insurance companies. No malice - just lack of knowledge of the systems (and occasional incompetence).

My advice is to do what you’re doing now. Keep pushing all the levers. Eventually it will get fixed.
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 Leesbro63 »

And to support that, just above: probably the prior year increases were above inflation, so no annuity beneficiary bothered to look closely. It’s the large 2021 inflation number that finally caught someone’s attention, which in turn wakes others up via the internet. But before 2021 inflation wasn’t on anyone’s radar.
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Re: CPI-U adjustment too small on AIG SPIA

Post by RustyShackleford »

Stinky wrote: Wed Jan 12, 2022 11:37 am I expect that there’s an error somewhere deep in the bowels of AIG.

Some functionary named Stevie or Susie inadvertently made the one year increase repeat year after year.
Wow, this could end up being a charlie-foxtrot for the ages.

However, as I've said before, I've checked my numbers every year since I got the thing in 2007, and my calculated payments have differed from the payment I actually received by little enough to not bother with (a few cents out of roughly $1000) - until now.

The only things that might be different about mine are that I signed up for quarterly payments, and I got mine thru Vanguard (although I believe at least some of the other people on this thread did too).
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

<<I'd appreciate confirmation from cool heads. Is this correct? >>

Yes, your results are exactly the same as mine (1.7% increase for 2020, 2021, 2022). FYI, my annuity was purchased thru Vangard late 2009, with monthly benefits beginning Jan 2010.

And FWIW I strongly agree with Stinky that persistence--continuing to bug AIG --is the key to success. While being respectful and calm in telephone calls and letters is critical, keep in mind that multibillion dollar companies don't get hurt feelings. It's OK to hassle them.
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Re: CPI-U adjustment too small on AIG SPIA

Post by drjbgmail »

< .. bowels of AIG... "

An apt metaphor ;)

Now for a purgative.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

drjbgmail wrote: Wed Jan 12, 2022 8:01 pm <<I'd appreciate confirmation from cool heads. Is this correct? >>

Yes, your results are exactly the same as mine (1.7% increase for 2020, 2021, 2022). FYI, my annuity was purchased thru Vanguard late 2009, with monthly benefits beginning Jan 2010...
Yes, it's actually 1.71% to two places.

A minor problem for me is that until I get my 1099-R, the only data I have are the actual deposits, with tax being withheld, and I need to calculate the pre-tax amounts. Fortunately they agree in a couple of years of overlap. My actual results with two-digit precision, with 2009 through 2020 being based on 1099's and 2021 and 2022 calculated from monthly deposits, have been:

Y = year
AIG = increase, year Y over year Y-1, as reported by the 1099-R for year Y.
CPI = increase, September Y-1 over September Y-2

Y, AIG, CPI
2009 -1.29% -1.29%
2010 1.14% 1.14%
2011 3.87% 3.87%
2012 1.99% 1.99%
2013 1.18% 1.19%
2014 1.66% 1.66%
2015 -0.04% -0.04%
2016 1.46% 1.46%
2017 2.23% 2.23%
2018 2.28% 2.28%
2019 1.71% 1.71%
2020 1.71% 1.37%
2021 1.71% 5.39%
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

Oh, forgot to mention. Called 877 299-1724 and after a reasonable wait on hold--didn't time it--a person answered, found my annuities with no trouble, seemed to understand the issue, and... darn it, forgot to write down what she said... left me with the impression she would send it to the right place for it to be dealt with.

As noted I also mailed a paper letter to

Peter Zaffino, Chairman and CEO
American International Group, Inc.
175 Water Street
New York, NY 10038

I'm reasonably confident a) that the problem has been brought to their attention in a way that will register if they aren't aware of it already, and b) that my two annuities, by contract number, are in the list of ones that need to be adjusted if they aren't already.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Stinky »

I think that the various contacts by Forum members will bring a positive resolution over the next few weeks. But if it doesn’t……

Nisiprius mentioned upthread that there had been a previous adjustment to his payments as a result of an “audit”. This opens up another possibility.

In my previous company, most all of the payment and financial functions were subject to review by Internal Audit on a rotating schedule, roughly every five years or so. It’s likely that the payment adjustment for nisiprius was the result of one of those audits.

If other avenues fail, folks could try to contact the Chair of the Board-level Audit Committee for AIG. That’s the Committee, headed by an outside Director, who is ultimately responsible for all audit functions of the company, including Internal Audit.

The “gnomes” in the company who actually do the internal audit work are a few steps below the Audit Chair. But I think that there’s a good chance that a complaint to the Audit Chair would get cascaded down to the gnomes for review and action.

As I said, likely not necessary. But another possible route of action.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

I'm guessing that the CPI adjustment is a manual chore and whomever had been doing it retired or otherwise stopped and it just got overlooked. I believe AIG stopped issuing inflation-adjusted SPIAs a couple of years ago, so maybe the whole "inflation-adjusted annuity team" moved on.

It's rather disturbing that last year's error, a 1.71% raise that should only have been 1.39%, did not get caught by AIG.

I dismiss any idea of shenanigans on AIG's part because that error was in policyholders' favor. And that's all the more reason for thinking AIG was really careless.

Anyway, now they know.

The 2014 mistake was an overpayment, so quite possibly someone said "if we just eat this, then our customers will all be happy, and we don't need to do a bunch of programming and database tinkering and special computer runs." Similarly, 2021 was also an overpayment so they can, if they wish, let it go, and keep the IT department out of it.

But the 2022 mistake is an underpayment. It's going to take a bit of work for them to send out adjusted amounts on subsequent payments. I figure that even with the best will in the world, it will take them a while.

I hope they will at least go for good PR and good customer communications and send out some letter promptly saying "Oops, we goofed, don't worry, we'll take care of it, we're working on it and will let you know..."

I wonder what the total number of such policies issued was? Based on the string of zeros within my policy numbers, probably a few thousand at most.
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Re: CPI-U adjustment too small on AIG SPIA

Post by Leesbro63 »

To Nisiprius, just above: What’s different this time is the need for urgency. My mother’s fairly small annuity payment underpayment won’t cause her any financial pain. But that may not be the case for everyone. AIG has an obligation to pay the correct amount and to do it on time. If they error in favor of annuitants, it’s their problem (although it does make annuitants question their ability to make prudent decisions to remain solvent). But an underpayment is a serious breach of contract that hurts the little guy. My guess is that they will fix this once it gets the attention of someone with authority.
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Re: CPI-U adjustment too small on AIG SPIA

Post by nisiprius »

Leesbro63 wrote: Thu Jan 13, 2022 4:19 pm To Nisiprius, just above: What’s different this time is the need for urgency. My mother’s fairly small annuity payment underpayment won’t cause her any financial pain. But that may not be the case for everyone. AIG has an obligation to pay the correct amount and to do it on time. If they error in favor of annuitants, it’s their problem (although it does make annuitants question their ability to make prudent decisions to remain solvent). But an underpayment is a serious breach of contract that hurts the little guy. My guess is that they will fix this once it gets the attention of someone with authority.
You're right.
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Re: CPI-U adjustment too small on AIG SPIA

Post by beanie »

I got through on the telephone right away by calling Annuity Administration at 877-299-1724. I was told that my issue would be sent to the "processing team", who would review and send me a letter of explanation, which I could expect to receive in three to five business days plus mailing time. We'll see.
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