Thursday, January 23, 2014

Dead Peasant Insurance

If you asked me, “What has been your most riveting read of the session?” you might expect me to answer, “The McDonnell Indictment.”  However, you would be wrong.

There are companion bills before the General Assembly, Senator Reeves’ SB 385 and Delegate Morris’ HB 514, which we are calling the “Dead Peasant” bills.  The concept of these bills is bizarre, and the fiscal impact statement (FIS) for these bills is the most riveting read of the session.

The concept behind these bills is that an entity created by a Virginia locality or by the Virginia Retirement System would borrow money and use the money to purchase life insurance on employees.  The example provided to me by a lobbyist supporting the concept is that the employer would take out a $250,000 policy.  When the employee died, the entity would get $200,000 and the employee’s heirs would get $50,000.  The collective value of the policies held by the entities would offset the unfunded pension liability on the books of the state and localities.

I asked someone at NEA who works on pension issues on the national level for her reaction to the bill.  Her response was as follows:

 “HB 514 is an effort to sell what is referred to as ‘dead peasant insurance’ on the lives of state and local employees and retirees. Although the idea has been shopped around in many states, no state has taken advantage of this—everyone recognizes it's a bad idea except for the folks who stand to make a lot of money in commission, fees, or perhaps campaign contributions!  … I can't think of a worse vehicle to fund a state's pension fund obligations.”

The Virginia Retirement System is the state agency charged with writing the FIS on these bills, and they seem to concur with NEA.  VRS expressed, “Doubts as to whether profiting from the deaths of VRS members is good public policy.”  Ya think?

VRS pointed out that, “The American Council of Life Insurers (ACLI) adopted a policy statement opposing government owned life insurance intended to support state retirement funds.  The ACLI opposes these forms of investment as tantamount to ‘wagering on human life.’”

Coincidentally, I was recently reading about the history of the Mid-Lothian mines in Chesterfield County Virginia.  These were the first coal mines in North America.   The mine owners insured the lives of the slaves before sending into the mines.  Most of the mining fatalities were slaves, but fear not because their owners profited from their deaths.  I guess this fits in with that “Virginia way” folks around here keep talking about.  Could the actions of these slave owners have inspired these bills?

If this bill passes, we can probably anticipate an end to employee wellness programs, and be careful about drinking the coffee in the teacher’s lounge – poisoning the faculty could pay off big time.

For some reason, the VEA Legislative Committee decided to oppose these bills.  I guess they just don’t have a death wish.