Bulletins

Retirees for Justice
2019 Verizon Proxy Campaign

Sickness Death Benefit

LATEST NEWS FROM PROTECTSENIORS.ORG

AARP Life Insurance not always a Great Deal for Seniors

Bell Atlantic Death Benefit

ICE - IN CASE OF EMERGENCY

MAJOR WIN FOR RETIREES IN CONNECTICUT LEGISLATURE!

6/4/2015
Retiree friendly legislation pioneered by ProtectSeniors.Org with the support of the Association of BellTel Retirees, has unanimously passed in both houses of the Connecticut General Assembly and it is now on its way to Governor Dannel Malloy’s desk to sign.

The bill, H.B. 6772, restores creditor protections to retirees who lost those protections in pension de-risking transfers.  Without this protection, after a pension de-risking transfer, creditors could garnish annuity payments, even those designed for retirement.

ProtectSeniors.Org was instrumental in drafting and was the sole lobbying organization working for the bill’s passage. 

James Casey, President of ProtectSeniors.Org said, “This is a major accomplishment for our organization, and is the first step in providing much needed protections for retirees in pension de-risking transfers.”

He continued, “Many retirees are simply unaware of the risk associated with pension de-risking. We thank Rep. Robert Megna (D-97), Chair of the State Insurance Real Estate Committee for introducing the bipartisan bill and co-sponsors Rep. Livvy R. Floren (R-149), Rep. Louis P. Esposito (D-116) and Senator Henri Martin (R-31).”

Jack Brennan, President of the 130,000 member Association of BellTel Retirees, said, “This is a major win for retirees in Connecticut and for ProtectSeniors.Org.  Our hats go off to ProtectSeniors.Org which conceptualized the bill and really made this happen.”

Retiree Ed Chromczak, resident of Beacon Falls, Connecticut, said “After working for Bell Atlantic for over 35 years, it was a shock to me that I had to worry about pension de-risking at this stage of my life.  I greatly appreciate this legislation, which provides relief and reduces anxiety on my part. I appreciate our state legislators for doing their part, and thankfully we have ProtectSeniors.Org as a watchdog group looking out for retirees and keeping a close eye on the new generation of corporations looking to improve their bottom line on the backs of their retirees. My thanks also go out to the BellTel Retirees for spearheading efforts to protect its retirees from the beginning.  None of us could have done this individually and it took the group’s organization and leadership to finally accomplish this legislation.”

The link to the legislation can be found at:

http://www.cga.ct.gov/2015/TOB/H/2015HB-06772-R00-HB.htm

SICKNESS DEATH BENEFIT

A Refresher on the Pensioner Sickness/Death Benefit By Thomas Steed At almost every regional member mini-meeting we host, the most common question we get from Association members is about the sickness and death benefit. While this may sound a tad depressing, knowing and understanding your rights and the rights of your beneficiaries is extremely important!

Many of our members are entitled to a death benefit, also known as the Sickness/Pensioner Death Benefit, which is payable to certain beneficiaries at the time of the retiree’s death. Here’s what you need to know: • The amount of the benefit varies and is based on an employee’s title and annual salary. • The benefit can only be paid to a surviving spouse who is living with you, or a dependent child or parent. • Beneficiaries only have one year after a death to claim the benefit or it reverts to Verizon by default. • The benefit is an addition to an employee’s life insurance. • Employees and retirees may obtain a verification certificate by calling 1- 855-489-2367.

NY/NE Management • Eligible if hired before June 30, 1985 • One-year’s pay benefit (pay frozen at June 30, 1985) including bonus • Benefit eliminated for retirements after Dec. 31, 2001 • Mandatory beneficiary includes surviving spouse, dependent child or dependent parent • Paid as lump sum

NY/NE Associate • Eligible if hired before Dec. 31, 1986 • One-year’s pay benefit (pay frozen Dec. 31, 1986) including differentials and awards • Benefit currently available for future retirements • Mandatory beneficiary includes same household surviving spouse, dependent child or dependent parent • Additional beneficiaries available as long as dependent on participant • Paid as lump sum or up to 5 annual installments

Mid-Atlantic Management • Eligible if hired before March 31, 1991 • One-year’s pay benefit (pay frozen Dec. 31, 1991) including bonus • Benefit eliminated for retirements after Dec. 31, 2001 • Mandatory beneficiary includes surviving spouse, dependent child or dependent parent • Paid as lump sum

Mid-Atlantic Associate • Eligible if hired before Aug. 9, 1986 • One-year’s pay benefit (final pay with differentials and awards, but capped at $39,000) • Benefit currently available for future retirements • Mandatory beneficiary includes same household surviving spouse, dependent child or dependent parent • Additional beneficiaries available as long as dependent on participant • Paid as lump sum

9-19-19
I, Sandy Noe, thought I would tell you my experience with this benefit. I retired in 1995 from non-management sales. I have 3 confirmation letters in hand, the fourth is “in the mail”.

Here are the confirmation letters I have received.

1 - “Pension Plan Other Death Benefit Confirmation Statement” dated 6/27/2007 from Verizon
2 - “Pension Plan Other Death Benefit Confirmation Statement” dated 7/05/2011 from Verizon
2 -“SuperMedia Sickness Death Benefit” dated 4/23/2013 from JP Morgan

I contacted Milliman, 866-767-1212 who handle our pension information. They were not familiar with the benefit so they had to look it up. They confirmed that I was entitled to this benefit and the amount which is the same as my other 3 letters. The amount is different for everyone since it is based on the employees title and annual salary as of 1985 for management (eliminated for retirements after Dec. 31, 2001) and 1986 for non-management (currently available for future retirements).

I asked for a confirmation letter and was told they do not send out confirmation letters! I insisted and stated that I have received 3 others from different companies as we kept being shuffled around an want something for my files! She said she would check and get back to me which she never did. I called again about 4 weeks later and was told they mailed it out to me August 30^th but went to my FL address. I am expecting it in the mail any day now.

Here is the info you need to know for NY/NE non-management. I can’t confirm that it is the same for others.

•Milliman - 866-767-1212

•Amount based on the employees annual salary as of Dec. 31, 1986

•Beneficiary includes same household surviving spouse, dependent child or dependent parent, additional beneficiaries available as long as dependent on participant

• Beneficiaries only have one year after a death to claim the benefit.

Some retirees (Verizon retirees and those transferred to Idearc/SuperMedia) are still
entitled to a death benefit (aka Sickness/Pensioner Death Benefit) which is payable to certain beneficiaries at the time of the retiree's death. We recommend that retirees call their benefits office to check on your eligibility, check on your beneficiary and ask for written confirmation. For Verizon benefits, the number is 1-855-489-2367. For retirees transferred to Idearc/SuperMedia the number is 866-767-1212 at Milliman. When calling, make sure that the person understands that you are not asking for life insurance. The Sickness/Pensioner Death Benefit is a totally different benefit. The written confirmation should be placed with other important documents and, it should be noted that this benefit will expire if not requested within 12 months of your passing.

 FROM THE ASSOCIATION of BELLTEL RETIREES INC, THIS LETTER IS INTENDED FOR VERIZON SHAREOWNERS ONLY

This letter is for our members who own Verizon stock. If you do not own Verizon stock, please pass this on to anyone you know who owns Verizon stock. Jack Cohen, the Chairman of the Association’s Board, introduced the “Severance Approval Policy” proposal described below.

If you have not received your Verizon proxy info by April 9th, contact your broker or call Computershare Trust Company at 1-800-631-2355. PLEASE DO NOT RETURN PROXY CARDS to the Association of BellTel Retirees.

DEAR FELLOW ASSOCIATION MEMBER:

We urge you to vote FOR Item 6 and AGAINST Item 3 on Verizon’s proxy card for the upcoming Annual Meeting, scheduled to be held May 7 in Minneapolis, Minnesota:

Item 6: Vote FOR the “Severance Approval Policy” for Excessive Golden Parachutes

While we support generous performance-based pay, we believe that requiring shareholder approval of “golden parachute” severance packages with a total cost exceeding 2.99 times an executive’s base salary plus target bonus is a prudent policy that will better align compensation with shareholder interests.

We urge you to use your “say on pay” to send a message that requiring shareholder approval of windfall severance benefits (Item 6, above) and adopting more challenging pay-for-performance thresholds for Performance Stock Units (PSUs) are reforms needed to align executive pay with shareholder interests. 

According to the 2015 Proxy Statement (table, page 61), if CEO Lowell McAdam terminates without cause following a change in control, or is terminated without cause at any time, he would receive an estimated $37.3 million in termination payments, more than seven (7) times his 2014 base salary plus target short-term bonus. He would also receive a $37.3 million payout for termination due to disability or death. Even if he voluntarily retires he would receive an estimated termination payout of $22.2 million in addition to pension plan accumulations valued at $2.7 million (Proxy, table page 53).

Similarly, CFO Francis Shammo and Executive Vice President Daniel Mead would receive an estimated $12.8 and $14.8 million, respectively, for any involuntary termination without cause – more than six (6) times their 2014 base salary plus target short-term bonus (2015 Proxy, page 47, 61). Shammo and Mead can also receive an estimated payout of $8.7 and $10.1 million, respectively, for termination due to retirement, death or disability.

These estimated termination payments are in addition to compensation that is earned prior to termination, including pension savings plans, deferred compensation plans, and executive life insurance benefits, which each pay out millions more.

A decade ago, after a shareholder proposal on Golden Parachutes sponsored by our Association received support from 59% of the shares voted, Verizon adopted a policy to seek shareholder approval for severance with a “cash value” in excess of 2.99 times salary plus target bonus. But this left a huge loophole, in our view: The Company policy excludes the value of the accelerated vesting of performance shares (PSUs) and of restricted stock (RSUs), including accrued dividends, from the total cost calculation that would trigger the need for shareholder ratification (2015 Proxy, page 46).

Because PSUs and RSUs are not vested or earned prior to termination, they are disclosed as termination payments in the Proxy. If a senior executive terminates after a “change in control,” all outstanding PSUs immediately “vest at target level performance” (Proxy at page 45 and 60). Had the executive not terminated, the PSUs would not have vested or paid out until the end of the performance period (up to 3 years later) – and could potentially have been worthless if performance compared badly to the Related Dow Peer index and free cash flow metric used by the Board.

For example, if CEO McAdam terminated next month after a change in control, the PSU grant for the 2014-2016 performance cycle would vest at the “target” level ($5.0 million as of 12/31/14) regardless of the company’s performance. The RSUs ($4.9 million as of 12/31/14) would also immediately vest, with the payout based on the price of Verizon’s stock at the end of the performance period (Proxy, page 50).

We believe our Company’s severance approval policy should be updated to include the total cost of termination payments, including the estimated value of accelerated vesting of RSUs and PSUs that otherwise would not have been earned or vested until after the executive’s termination.

Item 3: Vote AGAINST Approving the Executive Compensation Package

We urge you to use your “say on pay” to send a message that requiring shareholder approval of windfall severance benefits (Item 6, above) and adopting more challenging pay-for-performance thresholds for Performance Stock Units (PSUs) are reforms needed to align executive pay with shareholder interests. 

The case for executive compensation changes at Verizon is compelling in our view:

• Verizon’s Performance Stock Unit program provides significant payouts (32% of target) for below-median performance as low as the 26th percentile among the Dow Peer index selected by the Board – and even if total shareholder return is negative. Executive officers receive 102% of target for relative total share return (TSR) as low as the 44th percentile (2015 Proxy, page 41).

• Verizon’s nonqualified retirement saving plan continues to offer more generous benefits to senior executives than to rank-and-file managers and employees. For example, CEO McAdam received $461,000 in company contributions to the nonqualified plan in 2014, plus $45,700 in “above-market earnings” on his nonqualified plan assets. (Compensation Tables, pp. 47-48).

Please Vote Your Proxy Card:

FOR Item 6

AGAINST Item 3

Sincerely yours,

John M. Brennan
President & Executive Director

The cost of this letter is being borne entirely by the Association of BellTel Retirees Inc. This is not a solicitation. Please do not send your proxy card to the Association.

LATEST NEWS FROM PROTECTSENIORS.ORG

Another large corporation has announced its plans to cut healthcare benefits to its retirees. General Electric (GE), a company that clearly was built on the shoulders of its employees, announced it will no longer honor retiree health plans.  GE joins a list that includes IBM, Time Warner, DuPont and countless more.

These employees took lower salaries over their careers for promises into their retirement years now only to find that those promises are broken!  Our organization, ProtectSeniors.Org, is fighting this practice via Senate Bill 2418 which would make it difficult for companies to reduce or eliminate retiree earned benefits.

We need you to write your local media outlet and then share this with as many people as you can to get the word out.

Click on the TAKE ACTION link to begin.     Take Action!

The Senate Responds to Retirees" Concerns with S.2418

NRLN Seeking Victims of Medicare’s Three-Day Inpatient Requirement

Under the current Medicare payment policy, in order for Medicare to cover skilled nursing facility (SNF) services, the beneficiary must have an inpatient hospital stay lasting at least three days. Many beneficiaries are often unaware that the hospital has admitted them for observation rather than as an inpatient. Those admitted for observation who later receive SNF services are surprised to learn that observation days do not count toward the 3-day requirement and learn this only when they are billed for the services rather than the services being covered by Medicare.

The National Retiree Legislative Network (NRLN) advocates federal legislation to eliminate of the three-day hospital stay, or at least accept either classification, in order to qualify for SNF services to be paid by Medicare.

In the May 2014 NRLN Survey, a number of individuals responded that they had been impacted by the three-day inpatient requirement. Since the NRLN Survey was anonymous, except for those providing their name and contact information to receive NRLN emails and/or volunteer to assist the NRLN, we do not have a way of identifying those who have been impacted by the three-day inpatient requirement.

It would be very helpful to the NRLN if we could present to members of Congress the personal testimonials from Medicare beneficiaries who have been negatively impacted by the three-day inpatient requirement.

The NRLN would like to receive your story (or the story of someone you know) if you were hospitalized and later needed SNF services, only to learn that your hospital stay had been classified as observation rather than as an inpatient and Medicare did not pay for your SNF services.

Let us know the year of your hospitalization and how much you had to personally pay because Medicare did not cover your SNF costs. Also, we need your name and the city and state where you live. Members of Congress tend to pay more attention if a testimonial is from one of their constituents. Email your story to contact@nrln.org .

Bill Kadereit, President

National Retiree Legislative Network

Do Fortune 50 Pensioners Deserve to Receive Less Equitable Treatment in Federal Courts? 

 

 When formed in 2000, Verizon confirmed its obligations to provide Appellants their retirement benefits.  Then, six years later, desperate to improve its financial condition in order to raise stock value, Verizon decided to jettison those same obligations.  With an albatross of a paper telephone directories business around its neck, Verizon, in November  2006, made quick work of it.   Verizon spun off its directories business segment to an entity it formed named Idearc.   At the same time, Verizon pension fiduciaries, without any pension plan authority to do so, removed and abandoned Appellants to Idearc pension plans.   Then, Verizon attempted retroactively to sanction the fiduciaries’ action.

When retirees Philip Murphy, Sandy Noe and Claire Palmer (and others) challenged these actions in a pre-litigation administrative proceeding, they were denied a panoply of requested pertinent documents and information, as well as any other relief, including reinstatement into Verizon’s plans.  The retirees had no other recourse but to file a lawsuit in federal court.

 

“Sitting in equity, the district court is a ‘court of conscience.’” United States v. Durham, 86 F.3d 70, 73 (5th Cir. 1996) (quoting Wilson v. Wall, 73 U.S. (6 Wall.) 83, 90, 18 L.Ed. 727 (1867).  However, when ruling upon the retirees' equitable claims under ERISA, the District Court Judge in Dallas rejected any notion of equity, subordinating the retirees’ interests to those of Verizon, even basing some key rulings on contentions that were never made by either Verizon or Idearc/SuperMedia.

 

 Retirees were transferred to Idearc’s employee benefit plans without their knowledge or consent.  They were given no explanation, were not asked for permission, and were not even informed of the transfer until several months after the fact.  The transfer of retirees was not in the best interests of the retirees and, when the Verizon EBC facilitated the transfer of the retirees out of Verizon’s employee benefit plans into Idearc’s employee benefit plans, there was a clear breach by the Verizon EBC of ERISA statutory duties, including those imposed by ERISA Sections 404(a)(1) and 406(b)(2) and (3).

 

 ERISA Section 406(b)(2) prohibits fiduciaries with respect to a pension plan from acting in a transaction involving a plan on behalf of a party whose interests are adverse to the interest of the plan or its participants or beneficiaries.  The Verizon EBC members, when removing retirees from Verizon pensions plans, were doing Verizon’s bidding, acting contrary to the interests of retirees, and so violated ERISA Section 406(b)(2).   The District Court Judge improperly excused the fiduciaries by erroneously ruling that ERISA Section 406(b)(2) does not apply to fiduciaries when not acting in a fiduciary capacity.  The District Court Judge failed to address the retirees' claim of a violation of ERISA Section 406(b)(3).

 

 ERISA Section 404(a)(1) imposes a general fiduciary duty on plan fiduciaries, requiring the members of the Verizon EBC to protect the interests of retirees who are participants and beneficiaries of  Verizon pension plans.  The District Court Judge should have determined that retirees stated a viable claim of that duty in connection with the removal of Verizon retirees and their abandonment to Idearc, because there was no authority under the Verizon plans to transfer the retirees.  Verizon's attempt to validate the retirees’ removal on a retroactive basis was ineffective.

 

The District Court Judge improperly held that ERISA Section 102(b) was not violated by Verizon issuing defective summary plan descriptions to the retirees that failed to identify a corporate spinoff as an event which could give rise to an offset or a loss of retirement benefits.  There was no merit to the District Court Judge’s reasoning that, simply by virtue of one’s status as a Fortune 50 pension participant, one should be on notice of potential pension plan upheaval.  Likewise, the District Court Judge should not have adopted Verizon’s argument that a generic reservation of rights clause set forth in summary plan descriptions avoided any issue of adequate disclosure.

 

The District Court Judge also improperly determined that ERISA Section 404(a)(1)  was not violated when the Verizon EBC and the SuperMedia EBC failed to provide Appellants pertinent information and documents requested during the retirees’ pre-litigation administrative proceedings.

 

The District Court Judge erroneously determined that pension plan investment guidelines are not governing plan documents required, under ERISA Section 104(b)(4), to be disclosed upon written request of participants or beneficiaries.

 

The retirees have asked the Federal Appeals Court to reverse the judgment of the District Court Judge, direct the federal judge to enter partial summary judgment in favor of the retirees who were involuntarily transferred to Idearc, and remand this case for further proceedings.

 

Again, the best course of action is for Association members, especially the retirees who were unfairly transferred to Idearc/SuperMedia/Dex Media,

to read the legal brief, January 21, 2014 - Retirees' Appellants' Brief

especially the "facts" section.  Then, they will be well satisfied and thankful for the efforts by the Association to right this huge injustice.

 

Curtis Kennedy

AARP Life

Insurance Not Always a Great Deal for Seniors

Most seniors really don't need life insurance; if they do, they can get it cheaper elsewhere 

02/04/2013 | ConsumerAffairs | Insurance
By James R. HoodConsumerAffairs' founder and editor, Jim Hood formerly headed Associated Press Broadcast News, directing coverage of major news events worldwide. He also served as Senior Vice President of United Press International and was the founder and editor of Zapnews, a newswire service for radio and television. Read Full Bio→

Email Jim Hood Phone: 866-773-0221

AARP presents itself as an advocacy organization for seniors and no one would deny that it vigorously lobbies Congress on behalf of seniors. But in other areas, it's sometimes a little difficult to discern just how AARP puts its members' interests first.

Take life insurance, for example. Experts say many seniors really have little need for an expensive life insurance policy, yet AARP and its partner, New York Life, write millions of dollars per year worth of term life insurance for AARP members like Debi of Foley, Mo., who recently posted to ConsumerAffairs.

"We have had a life insurance policy on my husband for $8,000. The monthly amount was $84. Since 2008, I paid it monthly. Then without notification, they increased the insurance premium due to his age of 75 to $63.87 more a month," Debi said.

Chances are the policy on Debi's husband specified that the premium increases at age 75 and, quite likely, at other pre-determined ages. This is normal for term insurance, even though Debi may have overlooked it when taking out the policy. 

"Consumers think of these products as legacy products when they're really short-term security products," said Doug Heller, senior consumer advocate at Consumer Watchdog. "A lot of senior citizens don't appreciate that they are likely to be left with nothing as a result of these sales. Insurance is complicated. So when AARP gives it their stamp of approval, it just feels right. And it's often not right."

"Life insurance, including term life insurance, comes in many forms, and like any other financial product, AARP encourages individuals to consider their own situation and research options before making such an important purchase," said AARP spokesman David Allen. "Term life insurance can be an appropriate product for older individuals depending upon a person’s individual circumstances."

Competitive premium?

Leaving aside for a minute the question of whether Debi's husband should be paying for life insurance in the first place, let's look at that $147 rate. Is it competitive?

We went to TermForSale.com and requested a quote for a 10-year term policy for a 75-year-old non-smoker. Genworth, a highly-rated company, offered a $50,000 policy for $1,162 per year -- $113 per month -- for a preferred (meaning a non-smoker with no major health issues) policy, quite a bit less than Debi was paying.

Independent insurance agent Ed Hinerman tried a similar test. He's 58 years old and was quoted $211 per month by New York Life for an AARP plan. Using his own portfolio of companies, he found an $84 per month plan from Protective Life.

"If you’re healthy you could be paying as little as 1/3 of what New York Life wants," says Hinerman. "But our beloved AARP preys on us old folks and our parents and makes us believe that they are there for us. What a crock!"

Of course, all kinds of variables apply here. Many companies require medical testing before issuing a firm quote. New York Life doesn't require an exam for its AARP plan but it does require the applicant to provide medical information, which can affect the premium and can lead to payment disputes when the policyholder dies.

AARP did not respond to requests for comment on this article, blaming travel schedules of key staff members.

Built-in conflict

Insurance experts will tell you there is a built-in conflict when trusted non-profits get into selling insurance, travel packages and other services. 

Bob Hunter

"The problem with affinity groups like AARP is that a lot of times the group is held in great trust and esteem and when the group is selling something, there's a potential conflict," said J. Robert Hunter, Director of Insurance for the Consumer Federation of America, former Texas Insurance Commissioner and former head of the national flood insurance program.

"My wife's college sent her a low-cost group life insurance plan. I went to the website and found out that if you bought it online not using the affinity, it cost less, so there was a kickback to the college," Hunter said. "These groups tend to be making significant money off these products."

Consumer Watchdog's Heller concurs: "The way insurance companies rip people off is by credentialing their product in ways that overcome the product's failing and AARP is one of the most respected marketing tools that the industry has come up with. AARP's honorable brand is really sullied by these dishonorable products."

If you have a legitimate need for a term policy, Hunter recommends shopping online, saying it's "better than having an agent in your kitchen" but stresses that most insurance comparison sites get a kickback from the policies they list. TermForSale.com is one of the few comparison sites that lists all companies, even those that don't kick back a portion of the premium, he said.

Why have it?

But the larger question is why a 75-year-old man is paying for a term life insurance policy at all.

The purpose of life insurance, after all, is to provide a certain measure of security if a family's breadwinner dies prematurely. Term insurance is often ideal for younger people of working age, during the time that they are raising children and acting as the family's primary provider. 

Term insurance can be quite affordable for younger people for the simple reason that they are less likely to die, but the premiums for older people are much higher, causing many seniors to abandon their policies.

"The insurance industry knows a lot more about when you're going to die than you do," Heller said. "They price these in such a way that they get you off the policy right before you die. They know how to get you out of these policies, how to make them unsustainable."

That, in a nutshell, is why people like Debi's husband encounter drastic premium increases when they hit significant birthdays.

Besides, if one is lucky enough to make it to 75, it's likely the children are grown, the house is paid for and that the senior is collecting Social Security and perhaps pension payments that include survivor's benefits for those left behind. Rather than buying expensive insurance, personal savings can be used to cover what are euphemistically called "final" expenses -- meaning burial.

Earlier generations sometimes regarded life insurance as just that -- burial insurance. But term insurance purchased late in life is much too expensive to be used in this manner and simply amounts to, at best, a bad investment, most financial planners agree. If Debi's husband, for example, had been paying $84 per month for 10 years, he would have paid more than $10,000 for an $8,000 policy. If he died after letting the policy lapse, he would have lost that $10,000. If he died while the policy was still in force, he would have paid $2,000 more than his estate received from the insurance company.

Back in the day, there was something called an insurance "route man." This was an agent who sold relatively valueless life insurance policies to working families, then went around in person to collect the premium monthly or weekly, using the "get out there and sell something" philosophy outlined back in 1909 in the Life Insurance Independent, an insurance industry trade magazine.

Hucksters vs. professionals

This huckster's approach to the insurance business got short shrift in many industry publications in earlier times. No less a figure than the late Dr. Solomon Stephen Huebner, Emeritus Professor of Insurance at the Wharton School, wrote extensively about ethical issues in the life insurance industry.

Dr. Solomon Stephen Huebner

Huebner led a movement to "professionalize" insurance sales, insisting that life insurance agents needed to view their mission as similar to that of doctors, CPAs and lawyers.

"The professional must always be aware of and protect the client’s best interests," Huebner wrote, insisting that "the practitioner should abandon the strictly selfish commercial view and ever keep in mind the advantage of the client."

AARP seems to have rejected this philosophy, using advertising to urge life insurance onto its elderly members who, in most cases, would be better off putting the money into a savings account or mutual fund or simply spending it on themselves.

This is something a reputable insurance agent would have explained to Ellen of Jackson, Mich., who posted this in June 2012:

AARP Term Life Policy - I want to cancel my policy and get the $14,000.00 that was supposed to be paid to my benefactors, who told me to cash it as they do not need the money and I needed the money. I have had this policy since 1996, paying a premium of $97.31 monthly. I was told I cannot cash this in and get my money. They want me to go to a permanent life policy of which I was told would start at payout of $2,000.00. I have paid in more than $14,000.00 over the years. So as far as I am concerned, I am out all my money. This is a scam type of insurance.

Term is temporary

Ellen obviously did not understand what she was buying back in 1996 when she apparently signed up for a $14,000 term policy that has so far cost her -- if her figures are correct -- nearly $20,000. 

What Dr. Huebner would have explained to her is that a term policy is temporary -- good only for a certain term. If it's a 10-year policy, it covers you for the 10 years it's in force. If you die during that 10 years, your heirs "win" and collect the money. If you survive, you win but your heirs don't get any money, unless you renew for another 10 years -- at a higher premium -- and die before the end of that or a subsequent term.

Premiums, not surprisingly, go up sharply as you get older. A term policy that offers a "guaranteed" premium most likely does so only for the duration of the term. In most cases, it doesn't guarantee that you can renew at that rate, or at any other rate, at the end of the term. Only by reading the policy carefully -- or finding an ethical insurance agent -- can the consumer know for sure.

No residual value

Consumers rate AARP Life Insurance

So, what many consumers miss -- and what AARP and New York Life didn't bother to explain to Ellen -- is that there is no residual value in a term life policy. When the term expires, that's it. The money paid as premiums is gone. Term insurance is not a savings account, it's insurance -- and temporary insurance at that.

"Whole life," on the other hand, is insurance that has some residual value. In some cases, after you pay premiums for a defined period -- 20 or 30 years, perhaps -- the policy is paid up and you are covered for the rest of your life. Of course, you may have paid $100,000 for $50,000 worth of coverage but that's another story.

Very few reputable agents or financial advisors recommend whole life policies anymore. They are generally regarded as being not very good insurance -- and not much of an investment either. And there is no policy -- term or whole life -- that is going to be an economical purchase for someone in the 70-and-up age range. 

Consumers hoping to shield their families from having to shell out thousands of dollars in funeral expenses need to plan ahead. A modest investment portfolio started in middle age and allowed to grow over time will likely provide a higher "final" payment at much lower cost than a term policy. On the cost side, arranging for a simple funeral service and perhaps donating one's body to the nearest medical school can hold down final expenses. 

High hopes

Susan of Portsmouth, Va., is another consumer who had excessively high hopes for her term life policy:

My husband and I have had this insurance for five years and this is the second time the rates have gone up - this time, a whole $15.00. I suppose they will keep raising it until we can't afford it anymore and then we will cancel it. They know all about fixed incomes. If we cancel the insurance, we have nothing and will lose all the money we have put into it. They spend a ton of money on political issues. Why can't they afford to pay their claims and stop picking on seniors?

Well, we don't like to tell Susan this but unless she dies before the end of her term, she will "lose all the money" she has put into the insurance anyway. Insurance isn't savings and thinking of it that way leads consumers into making bad purchasing decisions.

If Susan's financial situation is so bleak that a $15 a month increase causes her pain, most financial advisors would say she should cancel the insurance and keep the money she is now paying for premiums. It would at least improve her standard of living a little and might enable her to save a few dollars for unforeseen expenses.

The sad truth is that many consumers of limited means will never benefit from the term insurance that they buy through organizations like AARP, simply because they are not likely to be able to afford the ever-rising premiums as they slip further into old age.

"What makes this story more interesting than your run-of-the-mill story of problematic issues of agents selling junk policies is that this is being done under the auspices of a credible organization that has earned the trust of people who, as a result, let their guard down," Doug Heller said. "Hey, it's AARP -- why would they steer me wrong?"

Good question. 

AARP responds

"By lending the AARP brand to high-quality, consumer friendly products and services, AARP seeks to influence a variety of industries and thereby to better serve the needs of our members and all older Americans," said AARP spokesman David Allen. "The service providers we work with are chosen for their sound business practices and their commitment to join us in supporting the goals of AARP. We stand behind the quality and value of AARP-branded products and services and the important role they play in improving the marketplace to better serve the needs of the 50+ population."

"When lending our name to life insurance products, AARP sought to make available to its members quality products available to a wide range of individuals that would also be affordable for many members – not just the healthiest. The AARP Life Insurance Program from New York Life accepts over 80 percent of applicants—and does not require a physical or medical records.

"It’s important to note that the AARP Life Insurance Program from New York Life also provides the same standard rate structure to all who are covered. This makes the program different from those insurers with tiers of health risks who accept many applicants but accept very few at the advertised lowest rate.

"Life insurance, including term life insurance, comes in many forms, and like any other financial product, AARP encourages individuals to consider their own situation and research options before making such an important purchase. Term life insurance can be an appropriate product for older individuals depending upon a person’s individual circumstances.

"New York Life and all providers of AARP-branded products and services are required to use clear, transparent facts and information and meet customer service performance metrics, including customer satisfaction, to ensure all member needs are addressed to AARP standards."

Bell Atlantic Death Benefit

A death benefit that is available to those members that were on the Bell Atlantic payroll as of August 1986.

This benefit is over and above the life insurance that our members receive from the company.

The life insurance is one years salary at the time of death or what the salary was when you retired.  That benefit begins reducing at the age of 65 and goes to 1/2 of your salary at the age of 70. It does not reduce any more that 50% of the years salary at the time that you retired.

The death benefit would be also a years salary, but no more than $39,000.00. That amount of money does not reduce with age. The company does not inform our members of this benefit. It is very important that you call the benefits center.  For Verizon benefits, the number is 1-855-489-2367. For retirees transferred to Idearc/SuperMedia the number is 800-345-2345. Ask if you qualify for this death benefit and if you do, ask them to send you a certificate acknowledging this benefit for your records.

A family member has one year from the time of your passing to collect this benefit. After the one year the death benefit is gone. Please pass this on to as many of our retired and active members that were on the payroll as of August 1986.

When you call the Benefits Center you want Life Events and then Benefits Center and they will send you a confirmation if you are eligible.  I was informed you must be pension eligible to receive a confirmation.

ICE - In Case of Emergency