[House Report 111-628]
[From the U.S. Government Publishing Office]


111th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     111-628

======================================================================



 
   SECURING AMERICA'S VETERANS INSURANCE NEEDS AND GOALS ACT OF 2010

                                _______
                                

 September 28, 2010.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Mr. Filner, from the Committee on Veterans' Affairs, submitted the 
                               following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 5993]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Veterans' Affairs, to whom was referred 
the bill (H.R. 5993) to amend title 38, United States Code, to 
ensure that beneficiaries of Servicemembers' Group Life 
Insurance receive financial counseling and disclosure 
information regarding life insurance payments, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.

                                CONTENTS

                                                                   Page
Amendment........................................................     2
Purpose and Summary..............................................     3
Background and Need for Legislation..............................     3
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
Statement of General Performance Goals and Objectives............     7
New Budget Authority, Entitlement Authority, and Tax Expenditures     7
Earmarks and Tax and Tariff Benefits.............................     7
Committee Cost Estimate..........................................     7
Congressional Budget Office Estimate.............................     7
Federal Mandates Statement.......................................     8
Advisory Committee Statement.....................................     8
Constitutional Authority Statement...............................     8
Applicability to Legislative Branch..............................     8
Section-by-Section Analysis of the Legislation...................     9
Changes in Existing Law Made by the Bill as Reported.............     9
Additional Views.................................................    12

                               Amendment

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Securing America's Veterans Insurance 
Needs and Goals Act of 2010'' or the ``SAVINGS Act of 2010''.

SEC. 2. FINANCIAL COUNSELING AND DISCLOSURE INFORMATION FOR 
                    SERVICEMEMBERS' GROUP LIFE INSURANCE BENEFICIARIES.

  (a) Financial Counseling and Disclosure Information.--
          (1) In general.--Section 1966 of title 38, United States 
        Code, is amended by adding at the end the following new 
        subsection:
  ``(e)(1) In order to be an eligible life insurance company under this 
section, a life insurance company shall--
          ``(A) make available, both orally and in writing, financial 
        counseling to a beneficiary or other person otherwise entitled 
        to payment upon the establishment of a valid claim under 
        section 1970(a) of this title; and
          ``(B) at the time that such beneficiary or other person 
        entitled to payment establishes a valid claim under section 
        1970(a), provide to such beneficiary or other person the 
        disclosures described in paragraph (2).
  ``(2) The disclosures provided pursuant to paragraph (1)(B) shall--
          ``(A) be provided both orally and in writing; and
          ``(B) include information with respect to the payment of the 
        claim, including--
                  ``(i) an explanation of the methods available to 
                receive such payment, including--
                          ``(I) allowing the insurance company to 
                        maintain the payment;
                          ``(II) lump-sum payment; and
                          ``(III) any alternative methods;
                  ``(ii) an explanation that any such payment that is 
                maintained by the life insurance company is not insured 
                by the Federal Deposit Insurance Corporation;
                  ``(iii) an explanation that interest earned on any 
                such payment that is maintained by the life insurance 
                company will be comparable to on-demand account 
                interest rates; and
                  ``(iv) other relevant information.
  ``(3) In order to be an eligible life insurance company under this 
section, a life insurance company may not charge any fees to a 
beneficiary or other person otherwise entitled to payment upon the 
establishment of a valid claim under section 1970(a) with respect to 
maintaining such payment with the company.
  ``(4) The Secretary shall include in each annual performance and 
accountability report submitted by the Secretary to Congress 
information concerning--
          ``(A) the number of individuals who received financial 
        counseling under paragraph (1)(A);
          ``(B) the number of individuals who received the disclosures 
        under paragraph (1)(B);
          ``(C) the information received by such individuals during 
        such counseling; and
          ``(D) any recommendations, complaints, or other information 
        with respect to such counseling that the Secretary considers 
        relevant.''.
          (2) Regulations.--The Secretary of Veterans Affairs shall 
        prescribe regulations to carry out section 1966(e) of title 38, 
        United States Code, as added by paragraph (1).
  (b) Office of Survivors Assistance.--
          (1) Advisory role.--Subsection (b) of section 321 of such 
        title is amended--
                  (A) by striking ``The Office'' and inserting ``(1) 
                The Office''; and
                  (B) by adding at the end the following:
  ``(2) The Director of the Office shall attend each meeting of the 
Advisory Council on Servicemembers' Group Life Insurance under section 
1974 of this title.''.
          (2) Resources.--Subsection (d) of such section is amended--
                  (A) by striking ``The Secretary'' and inserting ``(1) 
                The Secretary''; and
                  (B) by adding at the end the following:
  ``(2) In carrying out paragraph (1), the Secretary shall ensure that 
the Office has the personnel necessary to serve as a resource to 
provide individuals described in paragraph (1) and (2) of subsection 
(a) with information on how to receive the Servicemembers' Group Life 
Insurance financial counseling pursuant to section 1966(e)(1) of this 
title.''.

                          Purpose and Summary

    H.R. 5993 was introduced on July 30, 2010, by 
Representative Deborah L. Halvorson of Illinois. H.R. 5993, as 
amended, would ensure that beneficiaries of Servicemembers' 
Group Life Insurance (SGLI) policies receive meaningful 
financial counseling and improved disclosure information 
regarding life insurance payment options. It also would require 
that the Secretary of the U.S. Department of Veterans Affairs 
(VA) provide to Congress in their annual performance and 
accountability report information relating to the number of 
individuals who received the financial counseling; the type of 
information provided to those individuals; and recommendations, 
complaints, or other information regarding the counseling 
deemed relevant by the Secretary.
    This legislation would require the Director of the Office 
of Survivors Assistance (OSA) to attend each SGLI Advisory 
Council meeting. H.R. 5993 would also require that the 
Secretary of VA ensure that the OSA have adequate staffing to 
serve as a resource for beneficiaries on how they may receive 
the financial counseling offered.

                  Background and Need for Legislation

    H.R. 5993 would require that a life insurance company, as a 
condition of eligibility for participation under section 1966 
of title 38, United States Code, provide financial counseling 
and disclosures to beneficiaries eligible for payment under a 
SGLI policy. The bill would also require the Secretary of VA to 
report to Congress on the financial counseling requirements as 
outlined in the legislation. Additionally, it would allow the 
OSA to serve as an information referral resource to those 
beneficiaries seeking information on financial counseling.
    This legislation arises out of recent news reports that 
raised concerns about the nature of accounts currently 
administered by the Prudential Insurance Company of America 
(Prudential) to SGLI beneficiaries pursuant to authority vested 
in the Secretary of VA under section 1966 of title 38, United 
States Code, to purchase such policies. These reports 
highlighted at least two beneficiaries who reported problems 
with several vendors not accepting drafts provided to them by 
their life insurance company for the allocation of funds 
contained in Retained Asset Accounts (RAA or RAAs). Prudential 
calls its Retained Asset Account vehicle the ``Alliance 
Account.''
    An RAA operates as an interest-bearing demand account 
maintained by a life insurance company that is intended to 
allow sufficient time for beneficiaries to decide how best to 
allocate the proceeds of their benefit. Because the insurance 
company, in this instance Prudential, is not a bank, the drafts 
do not function exactly as would a traditional check. 
Furthermore, because the accounts are not maintained by a bank 
or other recognized financial institution, they are not 
protected by the Federal Deposit Insurance Corporation.
    The news reports also focused on the fact that the money 
from these accounts is pooled in the company's general fund 
rather than segregated in any respect. The general fund earns 
the company a higher rate of interest than it provides to 
beneficiaries through the account which is more similar to 
other demand account rates offered at financial institutions, 
such as banks.
    It was reported to the Committee by Prudential that it 
currently has 27,000 group clients, with about 24 million 
employees covered by life insurance, including its own 
employees. It was also reported to the Committee by the 
American Council of Life Insurers that RAAs have represented 
the industry standard for administering insurance proceeds pay-
outs by its member insurance companies since 1999. As of June 
30, 2010, Prudential reported that 10,038 or 7.5 percent of its 
RAAs are held by SGLI and VGLI beneficiaries. While the bill is 
silent on the suitability of the RAAs for the SGLI (and VGLI) 
program, the Committee intends to conduct further oversight on 
this issue.
    The beneficiaries featured in the news reports indicated 
that they were not made aware of the true nature of the RAAs. 
H.R. 5993 would ensure that SGLI beneficiaries receive 
increased financial counseling, and that the insurance company 
that manages the SGLI policies for the VA provide more 
disclosure in regard to all of the available options to receive 
policy proceeds. The Committee found that the current 
information provided by Prudential and VA did not accomplish 
this end.

Servicemembers' Group Life Insurance (SGLI) program

    SGLI provides group life insurance for the Uniformed 
Services, such as servicemembers on active duty, ready 
reservists, and members of the National Guard, among others. 
SGLI was established in 1965 in response to resistance from 
private life insurance providers that were unwilling to 
independently underwrite coverage for members of the Armed 
Services, primarily because they could not adequately predict 
the number of casualties for the Vietnam conflict. In 1965, 
Congress directed the Administrator of the Veterans 
Administration to purchase group life insurance to meet the 
need for government-backed insurance for the armed forces. The 
Administrator selected Prudential. According to information 
obtained by the Committee, Prudential has maintained a separate 
office for SGLI and has administered the policies with 
virtually no complaint for the past 45 years.
    Life insurance benefits from SGLI policies are managed by 
Prudential through Retained Asset Accounts. RAAs are a life 
insurance claims settlement mechanism that has been available 
to consumers for at least two decades.\1\ The accounts were 
initially created at the request of consumers to provide 
options for receiving benefits from a life insurance policy. 
When a beneficiary makes a proper claim, an RAA is established 
with the life insurance company for that beneficiary. The 
beneficiary may immediately draw on that account with drafts 
(often called ``checks'') provided by the insurance company. 
With the drafts, a beneficiary at any time may withdraw the 
entire lump sum of the account and deposit it with a financial 
institution, invest it, or spend it as they see fit. According 
to VA, on average, 25 percent of SGLI beneficiaries close their 
retained asset account within one-month of establishment and 84 
percent within one-year after establishment.
---------------------------------------------------------------------------
    \1\See e.g. letter from Mr. Thomas R. Sullivan, Insurance 
Commissioner, State of Connecticut, to Attorney General Richard 
Blumenthal, July 30, 2010.
---------------------------------------------------------------------------
    The beneficiary may also leave the funds in the account 
until they are prepared to decide where best to allocate the 
funds. During the time that the money is maintained in the RAA, 
it earns interest at a rate set by Prudential, which is 
currently .5 percent. Since Prudential is not a financial 
institution, the funds maintained in the RAA are not protected 
by the Federal Deposit Insurance Corporation. The Committee 
found that this critical information was not being provided in 
any form to beneficiaries by either the company or VA.
    While the RAA is maintained with Prudential, the company 
pools the funds with its general fund. The company's general 
fund is then invested in a number of ways, including some 
mechanisms with higher risk and therefore greater return. The 
interest rate for Prudential's general fund runs between 
roughly 4-5 percent at the time of Committee examination. The 
Committee found that the rate of return offered by Prudential 
was not inconsistent with the rate of return for other demand 
accounts, like general savings and checking accounts, offered 
by financial institutions such as banks or credit unions.

Greater disclosure, transparency and financial counseling for SGLI 
        beneficiaries

    H.R. 5993 would require the insurance company to provide 
all beneficiaries with financial counseling along with greater 
disclosures, both orally and in writing. The Committee believes 
that these improvements would better inform the beneficiaries 
of the facts associated with disbursement of the insurance 
proceeds. This includes the ability to receive a lump sum 
payment--currently provided in the form of a check, to maintain 
a lump-sum payment with the insurance company in an RAA, to 
receive 36 equal monthly installments which also collect 
interest paid by the insurance company, and any other options 
that may become available.
    The company also would be required to disclose that the 
rate of return on funds maintained by the insurance company 
will be comparable to those paid for similar demand accounts 
maintained by financial institutions. H.R. 5993 is not intended 
to contravene any provisions of current law as outlined under 
section 1970(d) of title 38, United States Code. H.R. 5993 also 
is not intended to authorize the retained asset account payment 
mechanism. Finally, H.R. 5993 is not intended to require that 
VA provide financial counseling through its congressionally-
mandated OSA, created pursuant to section 222 of P.L. 110-389 
(122 Stat. 4145). Rather, this subsection of H.R. 5993 is 
intended to ensure that the Secretary equip this office with 
proper information to serve as a resource for survivors and 
beneficiaries.
    The Committee notes that in response to this legislation, 
beneficiaries and actions by this Committee and other 
stakeholders, VA has recently stated that it now will modify 
all SGLI/VGLI related information, including frequently asked 
questions, Web site information and handbooks to clearly and 
completely explain all aspects of the Alliance Account offered 
by Prudential and all options available to the beneficiary. VA 
will require that the insurance company conduct follow-up 
contact with beneficiaries whose accounts remain open after six 
months to confirm that the beneficiaries understand the terms 
of their account. Consistent with H.R. 5993, the Committee 
believes that this follow-up contact should be made both orally 
and in writing.
    VA also indicated that it now will clearly designate the 
source of correspondence by removing the SGLI seal from all 
checks, forms, and correspondence and replacing it to show that 
it is from the insurance company, with the subtitle of Office 
of Servicemembers' Group Life Insurance; and, that it will 
identify additional opportunities to encourage beneficiaries to 
use the free financial counseling service. VA also informed the 
Committee of its intention to work in coordination with the 
U.S. Department of Defense to improve support to Casualty 
Assistant Officers and Transition Assistance Program personnel 
by helping to prepare additional training materials and 
instruction. The Committee will continue to conduct stringent 
oversight and work with VA to ensure that it follows through on 
these intended changes and makes others as necessary.

                                Hearings

    The Committee on Veterans' Affairs did not hold hearings on 
the legislation.

                        Committee Consideration

    On September 15, 2010, the full Committee met in an open 
markup session, a quorum being present, and ordered H.R. 5993, 
as amended, reported favorably to the House of Representatives, 
by voice vote. During consideration of the bill the following 
amendment was considered:
    An amendment in the nature of a substitute, offered by Mrs. 
Halvorson of Illinois to clarify that VA is not required to 
provide financial counseling was agreed to by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report the legislation and amendments thereto. 
There were no record votes taken on amendments or in connection 
with ordering H.R. 5993 reported to the House. A motion by Mr. 
Filner of California to order H.R. 5993, as amended, reported 
favorably to the House of Representatives was agreed to by 
voice vote.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the descriptive portions of 
this report.

         Statement of General Performance Goals and Objectives

    In accordance with clause 3(c)(4) of rule XIII of the Rules 
of the House of Representatives, the Committee's performance 
goals and objectives are reflected in the descriptive portions 
of this report.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                  Earmarks and Tax and Tariff Benefits

    H.R. 5993 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI of the Rules of the House of 
Representatives.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate on H.R. 
5993 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974.

               Congressional Budget Office Cost Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
for H.R. 5993 provided by the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 28, 2010.
Hon. Bob Filner,
Chairman, Committee on Veterans' Affairs,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5993, the Securing 
America's Veterans Insurance Needs and Goals Act of 2010.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Dwayne M. 
Wright.
            Sincerely,
                                         Robert A. Sunshine
                              (For Douglas W. Elmendorf, Director).
    Enclosure.

H.R. 5993--Securing America's Veterans Insurance Needs and Goals Act of 
        2010

    H.R. 5993 would expand the obligations of insurance 
companies that provide group life insurance to members of the 
uniformed services through the Servicemembers Group Life 
Insurance (SGLI) program administered by the Department of 
Veterans Affairs (VA). The bill would require participating 
companies to provide financial counselling to any beneficiary 
entitled to payment of a claim. Such counselling would have to 
include information regarding the advantages and disadvantages 
of depositing the payment in an account with the life insurance 
company versus an account at a financial institution. The 
information provided to the beneficiary also would have to 
specifically include a discussion of the conditions under which 
deposits would be insured by the Federal Deposit Insurance 
Corporation.
    H.R. 5993 would prohibit the life insurance company from 
charging fees if a beneficiary chose to deposit a payment in an 
account with the company. In addition, the bill would require 
VA to maintain sufficient personnel to provide survivors with 
information on how to obtain SGLI financial counselling. 
Because VA currently provides financial counselling to 
beneficiaries receiving life insurance payments, including 
descriptions of payment options and full disclosure of the 
terms of any payment, CBO does not expect additional personnel 
would be required to implement the provisions of this bill. 
Furthermore, any additional costs would be offset by an 
increase in premiums to the SGLI program, if necessary; 
therefore, CBO estimates that implementing the bill would have 
no net budgetary impact.
    Enacting H.R. 5993 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    H.R. 5993 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandate Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Dwayne M. 
Wright. The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates regarding H.R. 5993 prepared by the Director of the 
Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act would be created by H.R. 
5993.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for H.R. 5993 is provided by Article 
I, section 8 of the Constitution of the United States.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section would provide the short title of H.R. 5993 as 
the ``Securing America's Veterans Insurance Needs and Goals Act 
of 2010'' or the ``SAVINGS Act of 2010.''

Section 2. Financial counseling and disclosure information for 
        servicemembers' Group Life Insurance beneficiaries

    Subsection (a) of section 2 of H.R. 5993 would amend 
section 1966 of title 38, United States Code, by adding a new 
subsection (e) following section 1966(d).
    New paragraph (1) would require an eligible insurance 
company to provide beneficiaries of valid 1970(a) claims with 
financial counseling both orally and in writing.
    New paragraph (2) would require that the insurance company 
provide disclosure information both orally and in writing on 
methods available to receive proceeds of payment, including 
maintaining an account with the insurer's receipt of a lump-sum 
payment, receipt of 36 monthly payments; on the type of 
interest rates earned on payments maintained by the insurance 
company; and, information on whether the funds maintained with 
the insurer are protected by the FDIC.
    New paragraph (3) would prevent an eligible life insurance 
company from charging any fees for any reason in relation to 
benefits received from a valid claim under section 1970(a) 
including those that are maintained by the insurance company or 
paid in 36 equal monthly installments.
    New paragraph (4) would require that each annual 
performance and accountability report submitted to Congress by 
the VA include information on the number of beneficiaries who 
received financial counseling, the type of information provided 
to those individuals, and any recommendations, complaints, or 
other relevant information related to such counseling.
    Subsection (b) of H.R. 5993 would require that the Director 
of the Office of Survivors Assistance attend each meeting of 
the Advisory Council on Servicemembers' Group Life Insurance 
under section 1974 of title 38, United States Code. In 
addition, this subsection would require that VA ensure that the 
Office of Survivors Assistance have adequate staff to provide 
beneficiaries with information on how to receive financial 
counseling.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 38, UNITED STATES CODE

           *       *       *       *       *       *       *


PART I--GENERAL PROVISIONS

           *       *       *       *       *       *       *


CHAPTER 3--DEPARTMENT OF VETERANS AFFAIRS

           *       *       *       *       *       *       *


Sec. 321. Office of Survivors Assistance

  (a) * * *
  (b) Advisory Duties.--[The Office] (1) The Office shall serve 
as a primary advisor to the Secretary on all matters related to 
the policies, programs, legislative issues, and other 
initiatives affecting the survivors and dependents described in 
subsection (a).
  (2) The Director of the Office shall attend each meeting of 
the Advisory Council on Servicemembers' Group Life Insurance 
under section 1974 of this title.

           *       *       *       *       *       *       *

  (d) Resources.--[The Secretary] (1) The Secretary shall 
ensure that appropriate personnel, funding, and other resources 
are provided to the Office to carry out its responsibilities.
  (2) In carrying out paragraph (1), the Secretary shall ensure 
that the Office has the personnel necessary to serve as a 
resource to provide individuals described in paragraph (1) and 
(2) of subsection (a) with information on how to receive the 
Servicemembers' Group Life Insurance financial counseling 
pursuant to section 1966(e)(1) of this title.

           *       *       *       *       *       *       *


PART II--GENERAL BENEFITS

           *       *       *       *       *       *       *


CHAPTER 19--INSURANCE

           *       *       *       *       *       *       *


SUBCHAPTER III--SERVICEMEMBERS' GROUP LIFE INSURANCE

           *       *       *       *       *       *       *


Sec. 1966. Eligible insurance companies

  (a) * * *

           *       *       *       *       *       *       *

  (e)(1) In order to be an eligible life insurance company 
under this section, a life insurance company shall--
          (A) make available, both orally and in writing, 
        financial counseling to a beneficiary or other person 
        otherwise entitled to payment upon the establishment of 
        a valid claim under section 1970(a) of this title; and
          (B) at the time that such beneficiary or other person 
        entitled to payment establishes a valid claim under 
        section 1970(a), provide to such beneficiary or other 
        person the disclosures described in paragraph (2).
  (2) The disclosures provided pursuant to paragraph (1)(B) 
shall--
          (A) be provided both orally and in writing; and
          (B) include information with respect to the payment 
        of the claim, including--
                  (i) an explanation of the methods available 
                to receive such payment, including--
                          (I) allowing the insurance company to 
                        maintain the payment;
                          (II) lump-sum payment; and
                          (III) any alternative methods;
                  (ii) an explanation that any such payment 
                that is maintained by the life insurance 
                company is not insured by the Federal Deposit 
                Insurance Corporation;
                  (iii) an explanation that interest earned on 
                any such payment that is maintained by the life 
                insurance company will be comparable to on-
                demand account interest rates; and
                  (iv) other relevant information.
  (3) In order to be an eligible life insurance company under 
this section, a life insurance company may not charge any fees 
to a beneficiary or other person otherwise entitled to payment 
upon the establishment of a valid claim under section 1970(a) 
with respect to maintaining such payment with the company.
  (4) The Secretary shall include in each annual performance 
and accountability report submitted by the Secretary to 
Congress information concerning--
          (A) the number of individuals who received financial 
        counseling under paragraph (1)(A);
          (B) the number of individuals who received the 
        disclosures under paragraph (1)(B);
          (C) the information received by such individuals 
        during such counseling; and
          (D) any recommendations, complaints, or other 
        information with respect to such counseling that the 
        Secretary considers relevant.

           *       *       *       *       *       *       *


               ADDITIONAL VIEWS OF HONORABLE STEVE BUYER

    H.R. 5993, as amended, acknowledges a controversial 
practice by the Department of Veterans Affairs (VA) and the 
Prudential Insurance Company of America known as retained asset 
or ``Alliance'' accounts for paying Servicemembers Group Life 
Insurance (SGLI) benefits to families of deceased 
servicemembers.
    In response to media reports regarding the VA's use of 
retained asset accounts, H.R. 5993 was introduced on July 30, 
2010. It was then placed on the full Committee mark-up agenda 
on September 15, 2010. During the intervening period, the 
neither the Committee on Veterans' Affairs nor any of its 
subcommittees held legislative or oversight hearings on the 
issue or the bill, and consequently no record was established 
on which we could base informed policy decisions. The issues 
surrounding retained asset accounts are complex and unfamiliar 
to most of the Members of the Committee.
    We should not have to rely on media reports and our own 
individual efforts to obtain information to fully understand 
the implications of passing this legislation and any possible 
unintended consequences it could bring. The sponsor of this 
bill argues that H.R. 5993, as amended, does not change the 
existing payment authority and does not address the legality of 
retained asset accounts for SGLI purposes. I disagree and 
respectfully suggest that it may.
    While it is laudable to require VA to counsel SGLI 
beneficiaries on their benefits and the payment methods 
available to them, H.R. 5993, as amended, goes farther and 
specifically requires counseling about something 
euphemistically termed ``maintaining the payment.'' This is 
clearly a reference to the retained asset account method of 
payment and could well be interpreted as ratifying it or 
clarifying the existing statutory payment authority. The use of 
these accounts in place of the SGLI lump sum payment is 
currently the subject of a lawsuit in a federal district 
court\2\ by five plaintiffs against the Prudential Insurance 
Company of America. Prudential is VA's contractor for managing 
the SGLI program and making the payments to beneficiaries. New 
York's Attorney General has launched an investigation of 
Prudential as well.
---------------------------------------------------------------------------
    \2\Lucey v. Prudential Insurance Company of America, 10-30163, U.S. 
District Court, Western Distrit of Massachusetts (Springfield).
---------------------------------------------------------------------------
    This controversial issue is placed directly before the 
Committee by this bill. We should not be effectively approving 
this practice by specifically requiring VA to counsel 
beneficiaries about it. Instead, we should give it careful 
scrutiny and make sure we understand it sufficiently before 
deciding whether to expressly authorize it in law for the 
future. Our servicemembers, veterans, their families, VA, 
Prudential, and life insurance experts should all have an 
opportunity to weigh in on the record. I want to make it clear 
that I am not taking a position for or against this practice 
with my additional views.
    The real problem is that retained asset accounts, now that 
they have been questioned and are receiving scrutiny, appear 
not to conform to the payment authorization in section 1970(d) 
of title 38, United States Code, which only authorizes payment 
by a lump sum or 36 equal monthly installments, as follows:

          (d) The member may elect settlement of insurance 
        under this subchapter either in a lump sum or in 
        thirty-six equal monthly installments. If no such 
        election is made by the member the beneficiary or 
        beneficiaries may elect settlement either in a lump sum 
        or in thirty-six equal monthly installments. If the 
        member has elected settlement in a lump sum, the 
        beneficiary or beneficiaries may elect settlement in 
        thirty-six equal monthly installments.

    Certainly, it is a legitimate question whether the retained 
asset account is the same as a lump sum payment. With respect 
to SGLI, it is a question of first impression for the federal 
courts. Although this issue has lain dormant since VA approved 
the use of retained asset accounts in 1999, we are fully aware 
of it now. At the full Committee mark-up, the first time the 
Committee had the opportunity to discuss or consider HR 5993, I 
requested a prompt hearing on the bill before it was marked up, 
but the markup proceeded.
    VA has already issued new guidelines on counseling that 
provides for more counseling and disclosure than would H.R. 
5993, as amended. On September 13, 2010, VA released its new 
guidelines in the attached fact sheet: ``Actions for Improving 
the Alliance Account Program.'' While VA's new counseling 
approach should give SGLI beneficiaries a much better 
understanding of their payment options, it does not address the 
basic problem that the use of retained asset accounts as a 
method of payment may not be authorized by law.
    There is no critical necessity or emergency requiring 
passage of this bill without establishing a full record and 
giving it careful consideration. This Committee's consideration 
of H.R. 5993, as amended is premature and should have followed 
regular order.

                                                       Steve Buyer.

                                  
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