Imminent Demutualization of MetLife
May Affect Employee Benefit Plans

MetLife is converting from a mutual insurance company owned by its policyholders to a stock company that will become a subsidiary of MetLife, Inc. As a result of this “demutualization,” policyholders’ membership interests in MetLife -- including the right to vote on corporate governance issues -- will be extinguished.

In exchange for the loss of their rights, policyholders will be entitled to receive compensation. Generally, policyholders will be given the option to receive this compensation in the form of cash or shares of MetLife, Inc. common stock. In some cases, policyholders will be given policy credits. If a policyholder receives stock, it will be held for his or her benefit in a trust known as the MetLife Policyholder Trust.

Employee welfare benefit plans that provide medical, dental, vision, short-term disability, long-term disability, accidental death and dismemberment and life insurance may be affected by the demutualization. In addition, employee pension benefit plans may be affected by the demutualization if they have MetLife group annuity policies in connection with defined benefit and defined contribution retirement plans.

Decisions Policyholders Must Make Soon

Plan sponsors that are MetLife policyholders will soon have to make certain decisions with respect to the demutualization. These decisions, which should only be made in consultation with legal counsel, are described below:

• Vote in favor of or against the demutualization plan? MetLife’s demutualization plan must be approved by at least two-thirds of eligible policyholders who vote and by the New York State Superintendent of Insurance following a public hearing. MetLife must receive ballots by 4:00 p.m. EST on February 7, 2000.
• Elect compensation in the form of cash or stock? And, if receiving shares, will they be held or sold? Issues of whether to take stock or cash and when to sell stock should be made with the plan’s investment manager and legal counsel. The above-mentioned ballots must also note the policyholder’s decision on compensation. (MetLife’s attorneys recommend that plan sponsors review pertinent Department of Labor regulations regarding investment duties in determining whether to choose to receive cash or stock.)
• Allocate compensation among plan participants and, if so, how? Plan counsel, together with the plan’s fiduciaries, must make the decisions about whether compensation from MetLife is a plan asset and where money should go. (If a plan sponsor wants to distribute compensation to plan participants in a manner that is legally permissible, but is not currently permitted under the plan’s governing documents, the plan’s documents should be amended before compensation is received.)

Private-Sector Plans Must Consider
ERISA’s Fiduciary Requirements

Sponsors of private-sectors plans should consult with legal counsel to ensure that they take sufficient steps to prepare for the demutualization of MetLife. Failure to plan adequately could result in adverse tax consequences for plans, employers and plan participants and an inadvertent violation of fiduciary duty and plan asset rules under the Employee Retirement Income Security Act (ERISA). When voting on the demutualization plan, plan sponsors must determine whether the implementation of the plan is in the best interests of the participants and beneficiaries.

State and local government plans may also be affected by the demutualization if they are MetLife policyholders. However, since ERISA does not generally apply to these plans, the relevant state or local statute may govern considerations.

The Next Step: An IPO

If policyholders and the New York State Superintendent of Insurance approve the demutualization, MetLife will make an initial public offering (IPO) of common stock. At this time, the IPO is expected to occur in late March 2000.

Sponsors who receive shares of MetLife, Inc. common stock will be mailed a notice of their total number of shares of stock at least 14 days prior to the IPO. Sponsors who receive cash or policy credit compensation will be mailed a notice within 60 days following the IPO. On or after January 30, 2000, a plan sponsor can inquire about the amount of compensation they will receive by calling MetLife at (877) 833-8788.

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