Pre-needs sound alarm over new rules

PRE-NEED companies have been placed in a sticky situation by the new guidelines that raised the minimum trust fund deposits to 50 percent to 60 percent of collected funds, and would like the Securities and Exchange Commission to ease the rules.

The Philippine Federation of Preneed Companies Plans Inc. believes that the new guidelines to be implemented by the SEC will not solve the problem of the industry, according to group president Caesar Michelena.

“We believe that the new rules will only exacerbate the already bad situation,” he said.

Michelena said the industry wanted the minimum deposits from contributions lowered from the 50 percent for life plans and 60 percent for education and pension plans as spelled out in the SEC memorandum circular that covered plans registered as of last July 15.

The SEC is now studying the numbers proposed by the industry, but Michelena declined to elaborate on the proposal until after the SEC had relayed its feedback to the federation.

The commission requires pre-need companies to increase the minimum deposit to the trust fund to ensure that due benefits are delivered to planholders.

“This will not allow the preneed industry to have a viable pension or education product,” Michelena said.

Before the new guidelines, pre-need firms were required to deposit 45 percent of collections from life plans and 51 percent from education and pension plans.

The decision was made “to further protect the interest of planholders and enable the pre-need companies to efficiently meet their contractual obligations,” the SEC said.

In a separate order, the commission also required companies to cover trust fund deficiencies between 15 and 30 days. A company with a trust fund deficiency of below 15 percent will be given 30-day period to address the deficit.

A company failing to fill the deficit would find its license to deal in preneed plans suspended and its registered plans revoked.

The SEC tightened the rules after several pre-need firms collapsed with the slack in new business and planholders, squeezed by the global economic slump, failed to meet their monthly dues.

The trust fund deficiency of pre-need firms reached P46.83 billion at the end of June 2008 compared with a P6.8-billion in surplus in 2007. –Manila Standard Today