Which State SGA Insures Annuity?

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inputjam
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Which State SGA Insures Annuity?

Post by inputjam »

If I buy an SPIA (Single Premium Immediate Annuity) in Georgia, and I move to Washington, and the annuity insurance company is headquartered in Texas, and the annuity insurance company eventually goes bankrupt, which state's guaranty fund applies?
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Re: Which State SGA Insures Annuity?

Post by venkman »

Per: https://www.nolhga.com/policyholderinfo ... /questions
Which guaranty association will provide coverage for my policy?

Subject to limited exceptions, the guaranty association in a policy owner’s or certificate holder’s state of residence at the time the insurer fails will provide coverage, regardless of where the policy was purchased. For purposes of determining coverage, a person may be a resident of only one state. In the case of a non-natural person (i.e., corporate or other entity), residency will be determined by a “principal place of business” test.

If a guaranty association does not cover its residents because the insurer was not licensed in the state, the guaranty association in the state where the insolvent insurer is domiciled will provide coverage in most cases.
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Re: Which State SGA Insures Annuity?

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inputjam wrote: Sat Sep 18, 2021 2:37 pm If I buy an SPIA (Single Premium Immediate Annuity) in Georgia, and I move to Washington, and the annuity insurance company is headquartered in Texas, and the annuity insurance company eventually goes bankrupt, which state's guaranty fund applies?
TIA
Welcome to the Forum!

Venkman gave you the correct answer above.
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Re: Which State SGA Insures Annuity?

Post by nisiprius »

One important detail. A guaranty association does not "insure" an annuity. What is provided is not "insurance." The NOLHGA (National Organization of Life and Health Guaranty Associations is very careful about this, always using the words "protection" and "safety net," never "insurance."

(There is a similar distinction between bank deposit insurance, provided by the Federal Deposit Insurance Corporation, and the "protection"--not insurance--provided by SIPC, the Securities Investor Protection Corporation.)

What's the difference? "Insurance," in addition to having legal meanings regulated by state law, spells out specifically what the insurer does if the insured-again-event happens. If X happens, insurer pays $Y. Or, if X happens, insurer pays repair costs up to $Y.

The guaranty association law seems reasonable enough, but it leaves a great deal of the details, of what the guaranty association actually must do. A lot is left up to the discretion of the association, to be decided on a case-by-case basis. I have read that typically what they do is find a new insurer who takes over, or issues new and similar replacement policies, to the policyholders. There are some interesting wrinkles--most of the guaranty association laws hae a provision like this one (Pennsylvania--copied from the NOHLGA website)
40 PS §991.1703(b)(2)(iii). Guaranty Association excludes from coverage: Any portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (A) averaged over the period of four (4) years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier, exceeds a rate of interest determined by subtracting two (2) percentage points from Moody's Corporate Bond Yield Average averaged for the same four- year period or for such lesser period if the policy or contract was issued less than four (4) years before the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier;; and (B) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier, exceeds the rate of interest determined by subtracting three (3) percentage points from Moody's Corporate Bond Yield Average as most recently available.
I am pretty sure what this means is that if your annuity is too generous and your insurer fails, the guaranty association is not required to meet the same payouts that the original annuity had, they can reduce them.

I would love to know the degree of "customer satisfaction" in the guaranty associations by policyholders who've had their insurers fail, but in Google searches I haven't been able to turn up anything at all--no newspaper articles with interviews with people who've gone through it, for example.

I've personally experienced a credit union failure in an federally-insured (NCUA) credit union, and I know that it was literally a nonevent, not even a nuisance. I doubt that an insurer insolvency is that smooth or easy, but I know nothing about it.
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Re: Which State SGA Insures Annuity?

Post by HueyLD »

inputjam wrote: Sat Sep 18, 2021 2:37 pm If I buy an SPIA (Single Premium Immediate Annuity) in Georgia, and I move to Washington, and the annuity insurance company is headquartered in Texas, and the annuity insurance company eventually goes bankrupt, which state's guaranty fund applies?
The posters up thread have provided very good answers.

Some additional information below may be helpful.

(1). State insurance guarantee associations are NOT government supported. They do not carry any resemblance to the FDIC insurance that is backed by the full faith and credit of the federal government.

(2). The payments can be reduced by interest rate adjustment as Nisiprius indicated above. In other words, if your annuity payout is too generous relative to the current interest rates, they can reduce their calculated value by the difference.

(3). Some states may reduce the payout even further by a percentage. For example, California Association pays up to 80% of the calculated value.

(4). Each type of payout is further limited by a maximum amount by type. And there can be a lifetime maximum for all policies per individual.

In other words, the OP needs to do his due diligence ahead of time by researching the rules for all states involved so that he knows what to expect. In my state, $300k is the maximum lifetime limit per individual. As such, it is a good idea not to be too greedy. In general, annuities are supposed to be conservative investments and it may be better to take risk in the stock market.
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Re: Which State SGA Insures Annuity?

Post by nisiprius »

HueyLD wrote: Sun Sep 19, 2021 7:56 am(1)... State insurance guarantee associations are NOT government supported. They do not carry any resemblance to the FDIC insurance that is backed by the full faith and credit of the federal government...
To amplify a bit, they are not state agencies and there is no state pool of rescue money behind them.

Since insurance law is state law, you need to check the specific state--and the NOHLGA website is a very good resource--but the way it usually works is this:

a) The state has a state guaranty association law.

b) The law requires all insurers doing business in the state to belong to the guaranty association.

c) The law lays out broad requirements that say if an insurer fails, the other insurers in the association have the responsibility of taking care of the policyholders of the insolvent company. They are given a lot of scope on exactly how to do that in detail for any particular insolvency.

d) The law doesn't say where they can get the money to do this. The insurers in the guaranty association need to take care of this out of their own pockets. It's entirely their financial responsibility, not the state's.

e) Insurance companies don't want you to know about the existence of the guaranty associations. They want you to believe that you have no protection beyond the financial strength of the company. Most guaranty association laws actually prohibit insurers from mentioning it in advertising. Bank ads say "Member FDIC," brokerage ads say "Member SIPC," insurance ads never say "Member Winnemac State Guaranty Association." But the guaranty associations exist and there is some protection.
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Re: Which State SGA Insures Annuity?

Post by inputjam »

HueyLD wrote: Sun Sep 19, 2021 7:56 am(1)Since insurance law is state law, you need to check the specific state
These replies have been very helpful. The applicability of state law is precisely why I wanted to get clear on which state.

I am nearing retirement. My employer offers a cash balance pseudo-pension. (I'm sure there's a proper name for it.) When they stopped offering real pensions, they began contributing to a "Cash Balance Program of the COMPANY_NAME_HERE PBP". I can either take it as a cash payment on retirement or as an annuity paying about 7%.

Since I'm a pessimist by nature, I'm starting my decision by reviewing what happens if it all goes south. I'm pretty clear on what happens if I put it in the market and the market goes south. :wink:
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Re: Which State SGA Insures Annuity?

Post by Artful Dodger »

Keep in mind too that most states, if not all, limit the protection. For example, in my state, Annuity protection is limited to $250,000.
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Re: Which State SGA Insures Annuity?

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inputjam wrote: Sun Sep 19, 2021 11:09 am I am nearing retirement. My employer offers a cash balance pseudo-pension. (I'm sure there's a proper name for it.) When they stopped offering real pensions, they began contributing to a "Cash Balance Program of the COMPANY_NAME_HERE PBP". I can either take it as a cash payment on retirement or as an annuity paying about 7%.

Since I'm a pessimist by nature, I'm starting my decision by reviewing what happens if it all goes south. I'm pretty clear on what happens if I put it in the market and the market goes south. :wink:
Several comments on your post -

If you’re currently near retirement age, you could easily live 20 or 30 more years, or maybe even more. When looking at a potential payout over that long a period of time, I’d be looking for a relatively highly rated insurance company. If I were to purchase a SPIA. I’d definitely feel comfortable putting a considerable sum with an A++ company like New York Life or Mass Mutual, because I believe there is a diminishingly small chance that they would not fully perform on the contract. I would go down to an A+ company, or maybe even A, but probably no further. The best way to avoid being in a guaranty fund situation is to not purchase from a company that gets into that pickle.

Also, if your employer offers a periodic payment option for your cash balance plan, you might look at how the payout rates compare to the SPIA rates. You can get SPIA quotes on line at immediateannuities.com. If you did take the employer option, you would be taking the solvency risk on the employer or the pension plan. But that might be a reasonable risk to take if the employer is well funded, and the employer payout rates are higher than those available on a SPIA.
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Re: Which State SGA Insures Annuity?

Post by afan »

Because state guaranty associations limit the amount of payments protected, you may want diversify the risk. Purchase your annuities from top rated companies but do not have more than the protected amount with any one insurer. Then to lose money you would need to have more than one highly rated company fail.
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Re: Which State SGA Insures Annuity?

Post by inputjam »

Ugh. I think maybe I've been barking up the wrong tree.

The web pages for "Management Cash Balance Program of the MY_COMPANY_NAME_HERE PBP" tell me I can take the cash balance or an "annuity", so I assumed there was an actual annuity involved. I don't find any mention of an insurance company in the plan literature, and "PBP" stands for Pension Benefit Plan.

I now suspect that that if I take the "annuity", the company that makes the payment is the pension plan of MY_COMPANY_NAME_HERE, and if they go bankrupt, the PBGC gets involved.

Unless they're offering substantially better payments than an A-rated insurance company, I'd prefer to get my annuity (if I go that route) from an insurance company. (I trust actuaries to manage risk better than my employer.)
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Re: Which State SGA Insures Annuity?

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inputjam wrote: Sun Sep 19, 2021 3:07 pm
Unless they're offering substantially better payments than an A-rated insurance company, I'd prefer to get my annuity (if I go that route) from an insurance company. (I trust actuaries to manage risk better than my employer.)
I’d run the numbers if I were you.

Most folks who have posted similar questions on this Forum have found that the company plan pays out more than an insurance company SPIA. Often on the order of 5-10% more.
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Re: Which State SGA Insures Annuity?

Post by grok87 »

venkman wrote: Sat Sep 18, 2021 9:35 pm Per: https://www.nolhga.com/policyholderinfo ... /questions
Which guaranty association will provide coverage for my policy?

Subject to limited exceptions, the guaranty association in a policy owner’s or certificate holder’s state of residence at the time the insurer fails will provide coverage, regardless of where the policy was purchased. For purposes of determining coverage, a person may be a resident of only one state. In the case of a non-natural person (i.e., corporate or other entity), residency will be determined by a “principal place of business” test.

If a guaranty association does not cover its residents because the insurer was not licensed in the state, the guaranty association in the state where the insolvent insurer is domiciled will provide coverage in most cases.
Yep
Just an fyi, most insurance companies have separAte subs that write business in new york. So if you buy a policy in say pa and later move to ny so are likely going to be covered by neither pa or ny but by the insurers state of domicile
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Re: Which State SGA Insures Annuity?

Post by inputjam »

inputjam wrote: Sun Sep 19, 2021 3:07 pm I’d run the numbers if I were you.

Most folks who have posted similar questions on this Forum have found that the company plan pays out more than an insurance company SPIA. Often on the order of 5-10% more.
I haven't run comprehensive numbers yet, but the plan is offering about 50% more than an internet quote for a SPIA for a generic male my age. The SPD is full of references to the PBGC, so it looks like it is a pension and not an annuity. My plan is classified as a single employer plan, and PBGC is reportedly adequately funded for single employer plans. 50% better payment is worth a little risk.
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Re: Which State SGA Insures Annuity?

Post by grok87 »

inputjam wrote: Sun Sep 19, 2021 3:30 pm
inputjam wrote: Sun Sep 19, 2021 3:07 pm I’d run the numbers if I were you.

Most folks who have posted similar questions on this Forum have found that the company plan pays out more than an insurance company SPIA. Often on the order of 5-10% more.
I haven't run comprehensive numbers yet, but the plan is offering about 50% more than an internet quote for a SPIA for a generic male my age. The SPD is full of references to the PBGC, so it looks like it is a pension and not an annuity. My plan is classified as a single employer plan, and PBGC is reportedly adequately funded for single employer plans. 50% better payment is worth a little risk.
so i'm not following you. most folks think the PBGC, which is federally backed, is a safer guarantee that state guarantee funds, which are backed at the state level, and do not have the full state general obligation backing. but of course you may be in excess of PBGC limits perhaps?
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Re: Which State SGA Insures Annuity?

Post by Stinky »

inputjam wrote: Sun Sep 19, 2021 3:30 pm
inputjam wrote: Sun Sep 19, 2021 3:07 pm I’d run the numbers if I were you.

Most folks who have posted similar questions on this Forum have found that the company plan pays out more than an insurance company SPIA. Often on the order of 5-10% more.
I haven't run comprehensive numbers yet, but the plan is offering about 50% more than an internet quote for a SPIA for a generic male my age. The SPD is full of references to the PBGC, so it looks like it is a pension and not an annuity. My plan is classified as a single employer plan, and PBGC is reportedly adequately funded for single employer plans. 50% better payment is worth a little risk.
50% is a HUGE difference.

Have you checked the PBGC website to see the coverage limits? Would your monthly pension be less than the PBGC limits?
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Re: Which State SGA Insures Annuity?

Post by ResearchMed »

Artful Dodger wrote: Sun Sep 19, 2021 11:19 am Keep in mind too that most states, if not all, limit the protection. For example, in my state, Annuity protection is limited to $250,000.
ETA:

Nisiprius has corrected me below.

Apparently there can be a STATE limit in addition to the "per insurer" limit, so that must be taken into account also.

RM

------

I think that this limit (whatever state is relevant at the time of failure) is per person per insurer/annuity issuer.

So a solution is for each person to purchase an annuity up to whatever limit from each of several annuity providers, if one wants to annuitize a total that is higher.
Or is this also like FDIC, such that a couple might be able to get individual annuities and then also a joint annuity, all from the same insurer, while still being covered?

I guess given that the limit is where one ends up living, it might be prudent to select an amount per insurer that isn't more than the lowest state limit.

RM
Last edited by ResearchMed on Mon Sep 20, 2021 8:05 am, edited 1 time in total.
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Re: Which State SGA Insures Annuity?

Post by inputjam »

Stinky wrote: Sun Sep 19, 2021 4:32 pm [
50% is a HUGE difference.

Have you checked the PBGC website to see the coverage limits? Would your monthly pension be less than the PBGC limits?
grok87 wrote: Sun Sep 19, 2021 4:25 pm
so i'm not following you. most folks think the PBGC, which is federally backed, is a safer guarantee that state guarantee funds,
Agreed 50% is huge. It is big enough to warrant further investigation. The pension plan "annuity" is paying about 7.5%. I *wish* I had more than the PBGC limits! I'm nowhere close. Shucks, even half those limits would be wonderful. :moneybag :moneybag

Agree PBGC is much safer, particularly the single-company plan side of things. It makes a big difference to me. Where I'm reluctant to bet on my (soon to be former) employer for 35 years, betting on former employer PLUS PBGC gives me the warm fuzzies.

I haven't specifically said this, but I'd like to clarify that I'm considering an annuity (or an annuitized cash balance pension) as only *part* of my retirement plan. I'm not there yet, but I'd like to get to the point where the pension and Social Security could fund a bare bones lifestyle, so that the variable income from investments funds things I could defer if there's an extended market downturn.
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Re: Which State SGA Insures Annuity?

Post by nisiprius »

ResearchMed wrote: Sun Sep 19, 2021 6:01 pm ...I think that this limit (whatever state is relevant at the time of failure) is per person per insurer/annuity issuer.

So a solution is for each person to purchase an annuity up to whatever limit from each of several annuity providers, if one wants to annuitize a total that is higher.
Afraid not.

In every state I can remember looking at, there is an aggregate cap in addition to the limits "per insured life, per insurer." The aggregate cap limits the grand total the guaranty association protects, regardless of how many insurers you use.

Let's pick a state at random... Minnesota.

http://www.nolhga.com > Policyholder Information > Find your state guaranty association > Minnesota > FAQs

8. "Coverage limits, and are all covered policies fully protected?"
Not always. If your insurance company fails, the maximum amount of protection provided by the Minnesota guaranty association for each type of policy, no matter how many of that type of policy you bought from your company, is:

Life Insurance Death Benefit: $500,000 per insured life

Life Insurance Net Cash Surrender: $130,000 per insured life

Health Insurance Claims: $500,000 per insured life

Fixed Annuity Net Cash Surrender Value: $250,000 per insured life

Structured Settlement Annuities: $410,000 in present value per annuitant

Unallocated Group Annuities: subject to a maximum amount per covered plan--$250,000 per individual resident participant

Regardless of the number of policies or contracts with an insurer, the Minnesota Association is not liable to expend more than $500,000 with respect to any one life/individual.

These dollar amounts are effective for a rehabilitation or insolvency that occurs after May 8, 2009.
In some states, the aggregate cap is the same as the coverage for a single insurer!
Last edited by nisiprius on Mon Sep 20, 2021 5:13 am, edited 1 time in total.
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Re: Which State SGA Insures Annuity?

Post by ResearchMed »

nisiprius wrote: Mon Sep 20, 2021 5:11 am
ResearchMed wrote: Sun Sep 19, 2021 6:01 pm ...I think that this limit (whatever state is relevant at the time of failure) is per person per insurer/annuity issuer.

So a solution is for each person to purchase an annuity up to whatever limit from each of several annuity providers, if one wants to annuitize a total that is higher.
Afraid not.

In every state I can remember looking at, there is an aggregate cap in addition to the limits "per insured life, per insurer." The aggregate cap limits the grand total the guaranty association protects, regardless of how many insurers you use.

Let's pick a state at random... Minnesota.

http://www.nolhga.com > Policyholder Information > Find your state guaranty association > Minnesota > FAQs

8. "Coverage limits, and are all covered policies fully protected?"
Not always. If your insurance company fails, the maximum amount of protection provided by the Minnesota guaranty association for each type of policy, no matter how many of that type of policy you bought from your company, is:

Life Insurance Death Benefit: $500,000 per insured life

Life Insurance Net Cash Surrender: $130,000 per insured life

Health Insurance Claims: $500,000 per insured life

Fixed Annuity Net Cash Surrender Value: $250,000 per insured life

Structured Settlement Annuities: $410,000 in present value per annuitant

Unallocated Group Annuities: subject to a maximum amount per covered plan--$250,000 per individual resident participant

Regardless of the number of policies or contracts with an insurer, the Minnesota Association is not liable to expend more than $500,000 with respect to any one life/individual.

These dollar amounts are effective for a rehabilitation or insolvency that occurs after May 8, 2009.
In some states, the aggregate cap is the same as the coverage for a single insurer!
Thanks very much for the correction.
I'll go back and edit my comment.

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Re: Which State SGA Insures Annuity?

Post by afan »

Hence the logic of using multiple insurance companies.

Not that this buys you more protection from your guaranty association, but that it limits your overall risk. If your protection is capped at $250,000 and you have $750,000 from one company, then you would lose $500,000 if that company were to fail and you were to recover up to the guaranty association limit.

If you have $250,000 at each of three companies, then at least two would have to fail before your loss would exceed the cap on protection.

Of course, you would have to trade this off against the rates you get. Still the best solution is to go with high rated companies, in the hopes they will remain solvent for the long term.

Note that it can also take a very long time for a failed company to be cleaned up and you could be waiting for your payments. Perhaps not a problem if it is an investment annuity and you do not plan to take payments until years in the future. This could be a major issue if it was providing a monthly check you were using for living expenses.
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Re: Which State SGA Insures Annuity?

Post by grok87 »

afan wrote: Mon Sep 20, 2021 8:26 am Hence the logic of using multiple insurance companies.

Not that this buys you more protection from your guaranty association, but that it limits your overall risk. If your protection is capped at $250,000 and you have $750,000 from one company, then you would lose $500,000 if that company were to fail and you were to recover up to the guaranty association limit.

If you have $250,000 at each of three companies, then at least two would have to fail before your loss would exceed the cap on protection.

Of course, you would have to trade this off against the rates you get. Still the best solution is to go with high rated companies, in the hopes they will remain solvent for the long term.

Note that it can also take a very long time for a failed company to be cleaned up and you could be waiting for your payments. Perhaps not a problem if it is an investment annuity and you do not plan to take payments until years in the future. This could be a major issue if it was providing a monthly check you were using for living expenses.
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Re: Which State SGA Insures Annuity?

Post by Stinky »

nisiprius wrote: Mon Sep 20, 2021 5:11 am
ResearchMed wrote: Sun Sep 19, 2021 6:01 pm ...I think that this limit (whatever state is relevant at the time of failure) is per person per insurer/annuity issuer.

So a solution is for each person to purchase an annuity up to whatever limit from each of several annuity providers, if one wants to annuitize a total that is higher.
Afraid not.

In every state I can remember looking at, there is an aggregate cap in addition to the limits "per insured life, per insurer." The aggregate cap limits the grand total the guaranty association protects, regardless of how many insurers you use.

Let's pick a state at random... Minnesota.

http://www.nolhga.com > Policyholder Information > Find your state guaranty association > Minnesota > FAQs

8. "Coverage limits, and are all covered policies fully protected?"
Not always. If your insurance company fails, the maximum amount of protection provided by the Minnesota guaranty association for each type of policy, no matter how many of that type of policy you bought from your company, is:

Life Insurance Death Benefit: $500,000 per insured life

Life Insurance Net Cash Surrender: $130,000 per insured life

Health Insurance Claims: $500,000 per insured life

Fixed Annuity Net Cash Surrender Value: $250,000 per insured life

Structured Settlement Annuities: $410,000 in present value per annuitant

Unallocated Group Annuities: subject to a maximum amount per covered plan--$250,000 per individual resident participant

Regardless of the number of policies or contracts with an insurer, the Minnesota Association is not liable to expend more than $500,000 with respect to any one life/individual.

These dollar amounts are effective for a rehabilitation or insolvency that occurs after May 8, 2009.
In some states, the aggregate cap is the same as the coverage for a single insurer!
The way that I read it, the $500k limitation for Minnesota is per insurance company, not across all insurance companies.

The sentence bolded above refers to the total expenditure limit with respect to policies or contracts with an insurer. I interpret that to mean "with a particular insurer"; that is, with Company A.

If there's confusion, I think that it comes from the phrase "with respect to any one life/individual". I interpret this to mean that I can't collect more than $500k from any one insolvency. For example, let's say that I was unfortunate (or stupid) enough to have my health insurance, life insurance, fixed annuity, and structured settlement all with Company A. Even if the aggregate amount of my claims against Company A were greater than $500k, I couldn't collect more than $500k from the MN Guaranty Fund upon Company A's insolvency.

I don't see anything in the website, or the underlying law, that would restrict me from recovering more than $500k if I were unfortunate enough to have policies from more than one insolvent company. For example, let's say that I had fixed annuities in the amount of $200k each from Company A, Company B, and Company C. The total amount of fixed annuities is $600k. If all three companies entered receivership, I believe that I could collect $200k from the Guaranty Fund for each company - $600k in total.

One of the practical reasons that I believe that the $500k limit is per company is that each "insolvency estate" is different. In my example, Company A might be licensed in all 50 states, Company B in 25 states (including MN), and Company C in 10 states (including MN). Each insolvency would form a separate "insolvency estate", including the guaranty funds of the states in which each company was licensed. So there would be three entities operating, each with different member states. I believe that coordinating a $500k individual recovery limit across all of the various estates would prove to problematic, if not impractical.
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Re: Which State SGA Insures Annuity?

Post by afan »

I hope you are right. But when I check the three states that are of interest to me, neither has anything about "per insurer". Both indicate that the coverage is per individual.
For any one life the Guaranty Association is not liable for benefits aggregating more than $300,000 , or $500,000 for basic hospital expense insurance. basic medical-surgical insurance or major medical expense insurance benefits.
The bold is in the original document.
Are there limits and exclusions to covered policies? Yes. If your insurance company fails, the Association may become liable for benefits that are the lesser of benefits provided in your policy or contract, with respect to any one life (regardless of the number of policies or contracts held):
And
Life insurance death benefit $300,000 per life
Life insurance cash surrender $100,000 per life
Annuity benefits (present value) $250,000 per life
I can see how it might get complicated to track the amounts paid out across the country by all the the state associations in aggregate for a given company. However, it should not be difficult at all for one association to track how much it had paid out for any one life. When the total for one life hits the max, then the coverage ends. I suspect this has been answered in court when companies have failed and the results in each state are known. It would help if the language were more clear.
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HueyLD
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Re: Which State SGA Insures Annuity?

Post by HueyLD »

I can’t speak for other states, but my state is clear in terms of the maximum benefits.

“ Benefit Limits

§20-682 E. The benefits that the fund becomes or may become obligated to cover shall not exceed the lesser of: 1. The contractual obligations for which the impaired insurer or insolvent insurer is liable or would have been liable if it were not an impaired insurer or insolvent insurer. 2. With respect to one life, regardless of the number of policies or contracts: (a) three hundred thousand dollars in life insurance death benefits, but not more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance.….

(c) two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values…..

Notwithstanding subsection E of this section, the fund is not obligated to cover more than either: 1. An aggregate of three hundred thousand dollars in benefits with respect to any one individual under subsection E of this section except with respect to benefits for basic hospital, medical and surgical insurance and major medical insurance under subsection E, paragraph 2, subdivision (b) of this section, in which case the aggregate liability of the fund shall not exceed five hundred thousand dollars with respect to any one individual.…”

So, the maximum payable benefits for annuities in my state is $250k per insurer and $300k per individual
wolf359
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Re: Which State SGA Insures Annuity?

Post by wolf359 »

This is what the PBGC says they cover for maximum benefits:
https://www.pbgc.gov/wr/benefits/guaran ... -guarantee

If your pension is below these limits, it's better to go with the federal guarantee than the state one.
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Stinky
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Re: Which State SGA Insures Annuity?

Post by Stinky »

HueyLD wrote: Tue Sep 21, 2021 10:22 am I can’t speak for other states, but my state is clear in terms of the maximum benefits.

“ Benefit Limits

§20-682 E. The benefits that the fund becomes or may become obligated to cover shall not exceed the lesser of: 1. The contractual obligations for which the impaired insurer or insolvent insurer is liable or would have been liable if it were not an impaired insurer or insolvent insurer. 2. With respect to one life, regardless of the number of policies or contracts: (a) three hundred thousand dollars in life insurance death benefits, but not more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance.….

(c) two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values…..

Notwithstanding subsection E of this section, the fund is not obligated to cover more than either: 1. An aggregate of three hundred thousand dollars in benefits with respect to any one individual under subsection E of this section except with respect to benefits for basic hospital, medical and surgical insurance and major medical insurance under subsection E, paragraph 2, subdivision (b) of this section, in which case the aggregate liability of the fund shall not exceed five hundred thousand dollars with respect to any one individual.…”

So, the maximum payable benefits for annuities in my state is $250k per insurer and $300k per individual
I also can't speak for other states.

But I pulled up the language in my state (Alabama) and compared it to the language above. The language is almost exactly identical. I believe that both state laws are derived from a "model law" that was promulgated by a state regulatory group. I believe that the "model law" came from the National Association of Insurance Commissioner (NAIC), the guaranty fund association (NOHLGA), or some other similar group. "Model laws" are commonly used by state regulators to give legislators a template for individual state adoption of laws of common interest.

Then, I called my Alabama state guaranty fund. I posed the question - if I had fixed annuity contracts with multiple insurance companies, and each of the companies became insolvent and were subject to the guaranty fund provisions, could I collect up to $250k for each company. The answer was "yes" - the $250k limit applies per company, not per person. In other words, there is not an individual limit across multiple insolvencies - there is a limit per insolvency.

I expect, but am by no means certain, that the interpretation from my state's guaranty fund is the commonly accepted interpretation. I'd strongly suggest that anyone who has questions about their situation get in touch with their state guaranty fund.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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