Questionable Offer of Free Life Insurance for Pasco County Teachers
by: Jessica Bosari
April 28th, 2014
Florida teachers in Pasco County are torn over a proposal for free life insurance through a deal with investors, brokered through Pollock Financial Group. The set up would reportedly offer $50,000 life insurance payouts to members’ families upon death, while paying an additional $50,000 to the school district.
Life Insurance Plan Comes with Questionable Details
Without details on how the plan will work, or even which insurance company is connected to it, district members are hopeful but cautious. Many believed the insurance company involved to be reinsurer Swiss Re, but the company later denied knowledge of the plan. Funds supposedly would be channeled through a trust set up in Bermuda, but Swiss Re has no offices there.
Under the plan, investors would put $400 million up to cover the life insurance premiums, and receive tax-free investment income in return. This sounds a lot like the 831(b) captive plans recently described by Forbes’ Jay Adkisson as “simply a sham.”
Using 831(b) captives as an investment vehicle instead of a risk management tool might not withstand legal or Internal Revenue Service challenges, leaving school district employees with nothing for their efforts.
Adkisson reports that plans like these are being sold with assuring statements from actuaries that don’t address the reality of these plans. Investment returns are eroded by taxes and other fees, eventually making it impossible for the plan to continue functioning. Adkisson notes that arrangements like it have failed to prove their legitimacy in the past, citing VEBAs, 412(i) and 419A(f)(6) plans.
Florida Insurance Officials Launch Investigation
The Florida Office of Insurance Regulation finds the plan questionable, as well. The agency has launched an investigation into the proposal, for which the school board is grateful.
“Any time there’s a potential red flag and Florida consumers could potentially be hurt, it doesn’t hurt to take a closer look,” said Alyssa Lathrop, assistant general counsel for the Florida Office of Insurance Regulation, reports Tampa Bay Times.
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