Legislature(2009 - 2010)BELTZ 211
04/17/2009 01:30 PM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB101 | |
| HB129 | |
| HB201 | |
| HB102 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 101 | TELECONFERENCED | |
| + | HB 102 | TELECONFERENCED | |
| + | HB 129 | TELECONFERENCED | |
| + | HB 201 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 101-EXEMPTIONS: LIFE INSURANCE; ANNUITIES
1:35:56 PM
CHAIR FRENCH announced the consideration of HB 101. [Before the
committee was CSHB 101(JUD).]
AMANDA MORTENSEN, Intern to Representative John Coghill,
speaking on behalf of the sponsor, explained that HB 101 would
exempt the full value of life insurance and annuity contracts
from levy to satisfy unsecured debt. This bill would protect
Alaskan families and their ability to plan for the future. For
example, if "person A" were to hit "person B" with a car,
"person B" could sue for the assets of "person A". This bill
would protect "person A's" life insurance and annuity contract
so that his/her family could survive in the event of "person
A's" death. However, "person B" would not be prevented from
pursuing "person A's" other assets to fulfill a settlement
award. Additionally, HB 101 would protect the death benefits of
the spouse or a dependent of the debtor in the event the debtor
survives.
While retirement plans currently are creditor protected under
federal laws, this bill will help in instances in which the
employer does not provide the employee with a retirement plan.
The employee could use an annuity as a retirement plan and
provide financial security for themselves and their families.
Given the uncertainty of the Social Security system, this bill
is particularly important to help Alaska families to
legitimately provide for their future. She related that HB 101
falls under AS 09.38.015 Property exempt without limitation.
1:37:37 PM
Senator Therriault joined the committee.
MS. MORTENSEN explained that Section 1 removes the $10,000
exemption cap on life insurance and annuities. Section 2 removes
the language "or payable" to clarify a potential ambiguity that
would allow garnishment of death benefits prior to a person's
death. Section 3 repeals AS 09.38.025(a) because the exemption
of unmatured life insurance and annuity contracts now falls
under the category of "property exempt without limitation" in AS
09.38.015. Section 4 is an applicability section that states
that this will apply only to a debt that is created on or after
the effective date of this Act.
SENATOR WIELECHOWSKI asked if $100,000 in unpaid child support
could be removed from someone's $1 million life insurance policy
under this bill.
MS. MORTENSEN replied child support can be garnished from exempt
property under AS 09.38.65(a)(1)(A).
SENATOR WIELECHOWSKI asked if there is a list of things that
could be garnished that would not be covered by this bill.
1:39:26 PM
MS. MORTENSEN said the list includes: child support; unpaid
earnings of up to one month's compensation or the fulltime
equivalent for personal services of an employee; state or local
taxes; a levy against exempt property to enforce a claim for the
purchase price of the property or a loan made for the express
purpose of enabling an individual to purchase the property and
use it for that purpose; labor or materials furnished to make,
repair, improve, preserve, store, or transport the property; and
a special assessment imposed to defray costs of a public
improvement benefitting the property.
CHAIR FRENCH asked if the answer is yes or no to Senator
Wielechowski's question about whether or not the deceased's
annuity contract could be garnished to pay unpaid child support.
MS. MORTENSEN replied she would defer to Linda Hulbert to speak
to death benefits.
1:40:59 PM
CHAIR FRENCH asked if there has been opposition to the bill.
MS. MORTENSEN replied there hasn't been that much opposition;
most people see it as a benefit to Alaska families.
CHAIR FRENCH said he likes the general idea. He reviewed the
list of exempt property under Sec.09.38.015(a) and asked what is
included under paragraph (11), benefits paid or payable under AS
47.45.301 - 47.45.309.
1:42:20 PM
MS. MORTENSEN deferred to Mr. Bailey.
CHAIR FRENCH suggested the committee might consider imposing an
upper limit on the exemptions. He related that he typically
falls on the side of protecting consumers, but he's mindful of
the creditor who may have loaned a person $1 million based on
the strength of a contract, and suddenly they can't collect.
SENATOR WIELECHOWSKI noted that Ms. Mortensen said there hasn't
been much opposition to the bill and asked if there has been any
opposition.
MS. MORTENSEN explained that the main concerns related to the
potential for someone to use this fraudulently. But in other
states it's been proven that the courts don't allow fraudulent
transfers and hiding of money.
SENATOR WIELECHOWSKI asked if anyone has testified against the
bill.
MS. MORTENSEN answered no.
SENATOR WIELECHOWSKI assumed that if someone took out a loan and
used their life insurance policy as collateral, the heirs could
collect the life insurance.
MS. MORTENSEN deferred to Ms. Hulbert.
1:44:09 PM
SENATOR MCGUIRE noted that timing typically arises as an issue
in bankruptcy proceedings and suggested including language to
exclude blatant attempts to hide assets.
MS. MORTENSEN said Linda Hulbert could talk about that and
Dennis Bailey could say if other statutes address timing.
CHAIR FRENCH added that there may be a superseding section of
law that prohibits fraud.
1:45:22 PM
SENATOR THERRIAULT offered that the fraudulent transfer
provisions would speak to that.
LINDA HULBERT, Associate, New York Life Insurance Company,
testified in support of HB 101. She stated that today employers
are assuming less responsibility for employees so people need to
assume more for themselves. Individuals need to plan for the
wellbeing of their family and they need to plan for their own
retirement. HB 101 offers the same protection of life insurance
and annuities for planning as other states such as Florida and
Texas. She related that there is a specific Fraudulent Transfers
Act that is clearly defined by the court so anyone who enters
into this in any fraudulent manner would not find their assets
protected.
1:47:33 PM
MS. HULBERT explained that anyone can collaterally assign a life
insurance policy or annuity contract; in that event the creditor
comes before anything is paid to the individual or beneficiary.
She opined that this makes it clear that this bill does not
create a problem with creditors. Creditors can ask for and
receive collateral assignments so this doesn't mean that it
cannot be used to pledge against a loan. It means that if a
family enters into a legitimate planning process, they can rest
assured that either for retirement purposes or purposes of
taking care of loved ones that this is protected for them. This
is a critical planning tool, she said. To her knowledge the bill
hasn't received any negative testimony; there have been
questions about fraudulent transfers and abuse. "I think this is
very unlikely to be abused because of the careful protections
that our state has structured," she said. This bill isn't
designed for the very wealthy; this bill is for the majority of
Alaska citizens who want to accept responsibility for planning
and need protections for that.
1:49:11 PM
CHAIR FRENCH asked the difference between an unmatured life
insurance contract and a matured life insurance contract.
MS. HULBERT explained that a matured contract is when someone
has died and an unmatured contract is when someone hasn't died
yet.
CHAIR FRENCH asked if other states that have a similar law have
imposed an upper limit on the exemption.
MS. HULBERT said no. She added that the bill originally was to
be drafted only for insurance, but Linda Hall, the director of
the division of insurance, suggested it should be used for both
insurance and annuities because both are sound planning
techniques. Other states have included both and have not
encountered difficulties.
1:50:22 PM
SENATOR WIELECHOWSKI said it would be helpful to have examples
of the debts that are being exempted.
MS. HULBERT said the question is difficult to answer. She
continued:
Perhaps if there was a car accident and you were sued
and it went beyond the limits of your insurance you
could take other people's assets. But you couldn't
take their defined benefit plan - their retirement
plan - because that's federally protected. But if you
didn't have access to a federally defined retirement
plan and you had an annuity, then you could take that
person's potential annuity. Whereas this way if they'd
set aside money for retirement it would be protected
like their 401(k) or their defined benefit would be,"
she said.
SENATOR WIELECHOWSKI asked if debts other than lawsuits would be
exempt.
MS. HULBERT said she would defer to an attorney, but she hasn't
encountered that circumstance. I feel that people are more
secure knowing that they can plan, she added.
1:52:13 PM
SENATOR THERRIAULT asked if she knows what AS 47.45.301 -
47.45.309 reference.
CHAIR FRENCH said he just looked that up and they reference the
cash assistance payments to Alaska seniors.
SENATOR THERRIAULT recapped that a 401(k) and retirement plans
are protected under federal law and there isn't an upper limit.
None of the states with this type legislation have passed an
upper limit because if people don't have access to those
retirement plans they can use this as a component of retirement
planning. He asked if that's correct.
MS. HULBERT replied that's right. She related that many small
businesses no longer contribute to 401(k)s or offer retirement
plans because federal requirements have made the management
costs substantial. This bill is a needed mechanism that will
allow people to begin to plan for themselves and their families.
1:54:19 PM
CHAIR FRENCH asked Mr. Bailey if a person would be without a
remedy if they did not make an express statement regarding
collateral assignment in the debt instrument.
DENNIS BAILEY, Attorney, Legislative Legal and Research
Services, Legislative Affairs Agency, replied this is not a
question about whether or not they would have a remedy, but they
would not be able to collect against annuity contracts.
CHAIR FRENCH thanked him for the clarification.
MR. BAILEY referenced the discussion about the list of
exemptions under section .015 and that they're fairly nominal.
He offered clarification that under the exemption statute there
are other items that are exempt. Specifically, the Alaska
statute provides exemption for retirement plans.
CHAIR FRENCH asked if that's in subsection (b) to AS 09.36.015.
MR. BAILEY replied they are separately listed. The exemption for
retirement plans is under AS 09.38.017; there is an exemption
for homestead; and there is an exemption for a home.
CHAIR FRENCH recapped that categories of exemptions currently
exist in statute other than the nominal ones referenced earlier.
MR. BAILEY stated agreement.
1:57:17 PM
CHAIR FRENCH closed public testimony. He stated that he has
continuing questions about how this will work and he will hold
HB 101 in committee.
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