National Conference on Public Employee Retirement Systems

The Voice for Public Pensions

Group Life Insurance: Questions and Answers

  1. Why should a retirement system offer an insurance program?
  2. Are the rates competitive?
  3. Is the Plan financially sound?
  4. Would the retirement plan be at risk if they sponsored the program?
  5. Since most of our members have access to other insurance coverages, would this Plan be of interest to them?
  6. What if an employer, union or retirement system wants to provide this coverage for all its members?
  7. Is the Plan subject to rate increases?
  8. Would we need to have open bidding before adopting this Plan?
  9. What is the NCPERS role in this Plan?
 
  1. Why should a retirement system offer an insurance program?
    Public employers can have diverse needs for the security of their families that may not be fully met by the pension plan and other employment benefits.
    The NCPERS Life Insurance Plan is uniquely and specially designed to fill in the gaps where traditional may be insufficient, and as such can be an extremely valuable asset to retirement plan participants. The Plan provides its maximum benefits when pension survivor benefits are lowest, and coverage continues into retirement when much or all of the member and dependent group life insurance disappears. 
    This unique Plan is available to participating employers of retirement systems that are members of NCPERS, and is not available elsewhere.
     
  2. Are the rates competitive?
    The rates are based on over 40 years of favorable claims experience, backed up by substantial accumulated dividends used to support the Plan, and the mass purchasing power of a group of 85,000 employees/ retirees. We believe that comparable benefits are not available at this price from other sources.
     
  3. Is the Plan financially sound?
    Yes. The coverage is fully issued by The Prudential Insurance Company of America, one of the world's largest insurance companies*. The annual NCPERS premiums paid exceed $14 million per year**.
     
  4. Would the retirement plan be at risk if they sponsored the program?
           No. The benefits are fully insured by The Prudential Insurance Company of America, who is solely responsible for claims payment. Plan arranged and managed by Gallagher Benefit Services, Inc. the employee benefits division of Arthur J. Gallagher & Co. The plan is administered by Member Benefits, Inc.
     
  5. Since most of our members have access to other insurance coverages, would this Plan be of interest to them?
    The Plan benefits are payable in addition to other benefits, and the design of the Plan provides maximum protection when retirement benefits are smallest. The plan also appeals to higher risk occupations such as police and fire employees.
     
  6. What if an employer, union or retirement system wants to provide this coverage for all its members?
    This is allowable under the Plan. All the members/employees may be automatically enrolled in the Plan, and the sponsoring organization receives a group monthly bill for the premiums.
     
  7. Is the Plan subject to rate increases?
    Yes. However, this has not happened in the life of the Plan. On eight occasions the benefits have been increased without a premium change. The Plan, that originally started with a $6 premium is upgraded every few years for inflation, and members are given the opportunity to upgrade to a Plan with proportionally higher benefits and premiums.
     
  8. Would we need to have open bidding before adopting this Plan?
    Since there is no retirement system contribution or cost, bidding is not ordinarily required. In states that require bidding regardless of cost, this Plan is often considered to be a "Sole Available Provider" Plan, and exempt from the bid process because its history and design make it difficult to duplicate.
     
  9. What is the NCPERS role in this Plan?
    NCPERS sponsors the Plan, and is the policyholder. Retirement systems must be an NCPERS member to participate. Since NCPERS is a non-profit organization organized to provide education and support of public employee retirement systems, it has no role in the administration or management of the NCPERS Life Insurance Plan. NCPERS is compensated solely for the use of its name, service marks and mailing lists. NCPERS exercises general oversight of the Plan, and its interest is that the Plan remains a viable and beneficial Plan for its membership, and that the logo and service marks are used tastefully and properly.
     

* A.M. Best has Pru at No. 4 in world’s largest insurance companies by assets. (Source: A.M. Best, January 2016.) http://www3.ambest.com/ambv/bestnews/presscontent.aspx?altsrc=14&refnum=23496 

**Prudential Underwriting, 2017.