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Lawmaker wants probe of federal life insurance program

By Ed O'Keefe

(This item has been updated since it was first posted.)

By The Post's Federal Diary columnist Joe Davidson:

The chairman of the House Oversight and Government Reform Committee wants the Government Accountability Office to examine the operation of the Federal Employees Group Life Insurance (FEGLI) program.

In an letter to the GAO, Rep. Edolphus "Ed" Towns (D-N.Y.) questioned the "retained asset accounts" method the program administrator uses to disperse money due a beneficiary. The program is administered by MetLife insurance company and overseen by the Office of Personnel Management.

John Calagna, a MetLife vice president, said the company believes the accounts, which it calls Total Control Accounts (TCA) "are equal to or more favorable than receiving a check in virtually every scenario. Since TCAs are fully liquid on-demand accounts, TCA account holders have immediate access to the full amount of their life insurance benefits."

These accounts are basically low-interest bank accounts, but they are not insured by the federal government, as regular bank accounts are. Instead of giving lump sum payments directly to the beneficiaries, the money is held in a retained asset account until the beneficiary withdraws it. The deposits earn interest, but Metlife keeps a far greater portion of that interest than that paid to the beneficiaries, according to the committee.

"It appears that MetLife is paying itself a much higher interest rate on the money in these accounts than the interest they pay to the account holder. To many people that does not seem fair," Towns said in a press statement. "Furthermore, I am concerned that some beneficiaries may not fully understand their right to obtain immediate, lump-sum payment of their benefits."

About half of the accounts earn 3 percent interest and 80 percent earn 1.5 percent or better, Calagna said.

Leave your thoughts in the comments section below

By Ed O'Keefe  | September 30, 2010; 3:42 PM ET
Categories:  Congress, Workplace Issues  
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A lot is being made about these retained asset accounts. When my father-in-law passed away, my mother-in-law was able to choose whether to keep the money in the "checking account" or take a lump sum. She had a family member who was a CPA and has been a great help in managing my mother-in-law's investments. She was advised to take the lump sum and that money was invested conservatively. Not everyone has these kind of resources or is in a mind set to make these decisions at the moment of the loss of a loved one. It just amazes me that legilators are postulating about the big bad insurance companies making a profit on products they provide. An insurance company needs to invest premium dollars so that they can meet their obligations to policyholders. No one pays a million dollars for a million dollars worth of coverage. Unlike these legislators, insurance companies are held responsible for the guarantees they make; not just for the lifetime of the policyholder, but for the lifetime of the beneficiaries and beyond.

Posted by: njchurus | October 1, 2010 8:26 AM | Report abuse

@ njchurus...

jc... can't you comprehend what the issue is? So what your in-laws were able have a choice. THAT is not the issue. It is because Metlife is snatching the funds and drawing proceeds OFF of people's funds that THEY deserve. NOT the cronies in these banking executive offices! Learn to read!

Posted by: darbyohara | October 1, 2010 8:59 AM | Report abuse

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