Retained Asset Accounts
Written by Marlo .
Last week’s post regarding Prudential’s “Alliance Accounts,” resulted in some comments and a number of direct emails. Thank you, first, to all of the Servicemembers’ beneficiaries who wrote with personal stories regarding their experiences, and, second, to those who had on opinion one way or another.
Retained earnings accounts are accounts wherein a beneficiary’s benefit is held in a corporate account (usually owned by the insurer) until the beneficiary decides on another option. Last week Bloomberg wrote about Alliance Accounts and other similar accounts set up by life insurers for beneficiaries of fallen soldiers.
Prudential has announced it is reviewing the practice, maintaining, the funds–while not in an FDIC secured account–are held in an account “protected by State Guaranty Funds that provide protection of at least $250,000 in most states.” The National Association of Insurance Commissioners issued a statement regarding retained asset accounts. The statement points out the accounts have been around for decades in order to allow beneficiaries time to make financial decisions and the “NAIC is re-reviewing the disclosure requirements associated with RAA and is developing a consumer alert to help policyholders better understand the terms of these kinds of settlements. Regulators are also reviewing the transaction requirements/terms for the “checkbook” usage associated with these types of policies.”
Meanwhile, New York Attorney General Andrew M. Cuomo has launched an investigation into the practices of some of the insurers.