03/30/2015 01:30 PM Senate JUDICIARY

            SB  47-LIFE INSURANCE/ANNUITY EXEMPTIONS                                                                        
                                                                                                                                
3:02:41 PM                                                                                                                    
CHAIR  MCGUIRE announced  the  consideration  of SB  47. "An  Act                                                             
relating  to  exemptions  for   cash  surrender  values,  accrued                                                               
dividends,  and  loan  values   of  life  insurance  and  annuity                                                               
contracts."                                                                                                                     
                                                                                                                                
3:03:00 PM                                                                                                                    
SENATOR  COGHILL,   sponsor  of  SB  47,   noted  the  additional                                                               
information in the packets. Legislative  counsel Dan Wayne issued                                                               
a  memorandum   stating  that   retirement  benefits   of  public                                                               
employees  and members  of labor  unions generally  are protected                                                               
from  garnishment.  Lauri  Wing-Heier   with  the  Department  of                                                               
Commerce,  Community  and   Economic  Development  addressed  the                                                               
question about the  availability of life insurance  and the issue                                                               
on the cap.                                                                                                                     
                                                                                                                                
3:03:34 PM                                                                                                                    
GERMAN  BAQUERO, Intern,  Senator John  Coghill, stated  that the                                                               
intent of  SB 47 is to  repeal the $500,000 cap  on the exemption                                                               
of  life  insurance policies  and  make  them fully  exempt.  The                                                               
memorandum from Mr. Wayne thoroughly  explains the exemptions set                                                               
out in the  Alaska Exemptions Act, AS  09.38.017. The legislation                                                               
was passed  initially because life insurance  policies were being                                                               
used as a private investment  tool to secure retirement benefits.                                                               
It now  seems prudent  to treat  life insurance  the same  as the                                                               
other fully  exempt retirement  benefits in  Title 9.  Lori Wing-                                                               
Heier, the  Director of the  Division of Insurance,  advised that                                                               
the  bill will  not provide  an exemption  for criminal  acts but                                                               
will for civil acts.                                                                                                            
                                                                                                                                
SENATOR  COGHILL noted  that the  Legal Services  memorandum says                                                               
that AS  09.38.015(a)(6) exempts  from debt collection  in Alaska                                                               
"compensation  or  benefits  paid  or payable  and  exempt  under                                                               
federal law."  According to the  U.S. Supreme  Court, garnishment                                                               
of  retirement benefits  is generally  prohibited  by ERISA,  the                                                               
Social  Security  Act, the  Railroad  Retirement  Act, the  Civil                                                               
Service Retirement  Act, and  the Veterans'  Benefits Act.  SB 47                                                               
makes it more  equitable for the people who are  making their own                                                               
retirement through life insurance or an annuities.                                                                              
                                                                                                                                
CHAIR MCGUIRE asked Senator Wielechowski if he was satisfied.                                                                   
                                                                                                                                
SENATOR WIELECHOWSKI  questioned the wisdom of  a total exemption                                                               
and wondered whether  it was better policy to place  a $5 million                                                               
or $10 million cap on the exemption.                                                                                            
                                                                                                                                
SENATOR COGHILL  responded that small  business owners  don't get                                                               
the  same protection  that public  employees  receive. He  opined                                                               
that  in many  ways those  are the  people who  are carrying  the                                                               
weight in society.                                                                                                              
                                                                                                                                
3:12:01 PM                                                                                                                    
SENATOR WIELECHOWSKI  agreed that the limit  should be increased,                                                               
but argued against  making it possible for someone  to shield all                                                               
their assets from potential garnishment.                                                                                        
                                                                                                                                
SENATOR COGHILL talked about the business  he grew up in and said                                                               
that if it  hadn't been for insurance policies,  his father might                                                               
have lost  his retirement. He  offered other examples  and opined                                                               
that  small  businesses  should  have  the  same  protections  as                                                               
government employees.                                                                                                           
                                                                                                                                
SENATOR  WIELECHOWSKI restated  that  he agrees  that the  limits                                                               
should  be increased.  However, at  some point  it bumps  against                                                               
someone's constitutional  right to file  a lawsuit if  all assets                                                               
are  shielded from  garnishment. He  said he's  trying to  find a                                                               
balance.                                                                                                                        
                                                                                                                                
3:18:21 PM                                                                                                                    
SENATOR COGHILL moved to report SB 47 from committee with                                                                       
individual recommendations and attached zero fiscal note.                                                                       
                                                                                                                                
3:18:36 PM                                                                                                                    
CHAIR MCGUIRE announced that without objection SB 47 is reported                                                                
from the Senate Judiciary Standing Committee.