Preneed firms should account for windfall from forfeited plans

Published by rudy Date posted on March 31, 2009

The Trade Union Congress of the Philippines (TUCP) urged regulators to compel pre-need companies to account for the estimated billions of pesos they hoarded from lapsed and forfeited plan contracts as well as in-force plans voluntarily surrendered by investors.

Over the years, pre-need firms have accumulated a lot of money from forfeited plans. They collected extra funds from valid contracts that investors freely gave up or terminated for whatever reason. The Securities and Exchange Commission (SEC) should mandate pre-need firms to report quarterly as to how many plans were cancelled, and the extra earnings they retained from these plans. They should be required to routinely report their stash from lapsed and surrendered plans as part of the “increased disclosure and transparency reforms” under the proposed Pre-Need Industry Code.

We are pushing for reforms because we want what is left of the industry to survive, for the sake of planholders who are mostly salaried employees or wage earners. Many workers have invested their hard-earned savings in pre-need plans, hoping these would help them realize their hopes and dreams to send a son or daughter to college, or to have a small nest egg upon retirement.

A portion of the pile from forfeited and surrendered plans should revert back to the trust funds meant to guarantee benefit payments due other planholders, and not just end up lining the pockets of the pre-need firm’s shareholders and executives through dividends and bonuses.

Under most plans, pre-need firms get to keep all prior contributions when a contract lapses and eventually gets cancelled due to the investor’s failure to pay the premium. The plan-holder does not get a single centavo back. Pre-need firms also get to collect extra money from plans freely surrendered by planholders prior to maturity, either because they need the money, or they could no longer cope with premium payments.

Surrendered plans refer to valid (not lapsed) contracts that planholders voluntarily terminate at any time, or for any reason, before any benefit payments have been made. An investor who surrenders a plan usually gets back at most only 50 percent of all the money he or she paid, if at least 80 percent or more of the total contract price had already been paid. Worse, a planholder who has paid less than 20 percent of the contract price does not get back a single centavo. Everything gets forfeited in favor of the pre-need firm.

Seven out of 24 pre-need firms with existing dealer’s licenses have incurred deficiencies in their trust funds as of December 31, 2008, the SEC said. A deficient trust fund implies that the pre-need firm may not have enough money set aside to guarantee full payment of all future benefit obligations to planholders.

Release of 6 captive teachers

The TUCP has also appealed for the immediate release of six public school teachers seized by bandits in Zamboanga Peninsula. We join the Department of Education and the Teachers’ Dignity Coalition in pleading for the freedom of the teachers on humanitarian grounds. Our hearts go out to the families of the teachers. We continue to pray and hope for their safe and swift recovery.

These brigands in Mindanao should spare teachers from their kidnapping-for-ransom activities. Teachers pose no threat to anybody. They are simply performing their meritorious duties in educating our children. They deserve to be safeguarded by everybody, not harmed or endangered in any way.

Now held by kidnappers are six teachers—three from the Bara-ngay Bangkaw-Bangkaw Elementary School in Naga town, Zam-boanga Sibugay, and another three from the Barangay Lan-dang-Gua Elementary School on Sacol Island, Zamboanga City. Teachers Noemi Mandi, 39, Jocelyn Enriquez, 42 and Jocelyn Inion, 39, were abducted at gunpoint March 13 by a band of marauders led by a Kasma Hasdasal. The teachers were crossing Busan Bay to the Naga town center when the pirates intercepted their motorized boat.

Teachers Janette de los Reyes, 27, Freires Quizon, 29, and Rachel Mayorada, 22, came from Sacol and were on their way by boat to another village when they were snatched January 23 by armed thugs and taken to nearby Basilan island.

TUCP’s allied unions include local teachers’ federations in the provinces.

SP Enrile streamlining

I heard Senate President Enrile did not renew the service contracts of around 200 casual employees of the Senate, at the same time ordering all the regular employees of the Senate who are detailed in other offices to go back to their mother units.

This is in a bid to streamline functions and services and prevent a bloated bureaucracy. Enrile found out that that a lot of the Senate offices justify the hiring of casuals because they are supposedly undermanned, and yet they have detailed their staff to the offices of senators and to other government agencies.

Hence, he ordered the recall.

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