[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.