04/09/1997 01:30 PM Senate JUD

                                                                               
 TAPE 97-28, SIDE A                                                            
 Number 00                                                                     
              SB 119 FRATERNAL BENEFIT SOCIETIES                              
                                                                              
  CHAIRMAN TAYLOR  called the meeting back to order at 4:15 p.m. on            
 April 10, 1997.  Present were Senators Taylor, Miller and Pearce.             
 The first order of business before the committee was CSSB 119.                
                                                                               
  CHARLIE MILLER , representing the National Fraternal Congress of             
 America, stated he was testifying for Richard Klevens.  The                   
 National Fraternal Congress of America represents fraternal benefit           
 societies that are charitable in nature, usually organized around             
 common ethnic, vocational or religious groups.  Among many                    
 functions, these organizations also offer insurance plans to                  
 members.  Several groups are not domiciled in Alaska, but are                 
 admitted to write insurance; the Independent Order of Foresters,              
 Knights of Columbus, Sons of Norway, etc.  Chapter 84 of Title 21             
 is the affected statute in the insurance code and was based on a              
 model act enacted in 1966.  It has been modified over the years but           
 is still not up-to-date regarding the needs of consumers and                  
 insurance writers.   Provisions of current law conflict with                  
 administrative laws produced outside of the State government and SB
 addresses those differences.  A few examples are irrevocable              
 beneficiaries, privilege to assign insurance to another owner, and            
 purchase insurance on a third party basis which are all common                
 transactions in estate planning and income tax planning.  The model           
 act before the committee does not expand the market.  The most                
 important provision, from the Fraternal's point of view, is that              
 the Fraternals can form subsidiaries and non-profit institutions to           
 carry out charitable, benevolent purposes.  The irrevocable                   
 beneficiary designations and absolute assignments in the insurance            
 certificates will allow members to use their insurance for estate             
 planning needs.  The Fraternals set up separate accounts and issue            
 variable insurance products to members upon approval of the                   
 director of the Division of Insurance in keeping with FCC                     
 requirements and the Fraternals may issue, again upon approval, new           
 life or health insurance products that may be developed in the                
 future.  Staff from the Division of Insurance felt rewriting the              
 Code was a better way to go rather than offering piecemeal                    
 amendments.   The model act is considered user friendly.  The code            
 has been enacted in 33 other states and 4 other states have enacted           
 essential pieces of the act.  There are 8,000+ fraternal members              
 who will be affected.  In 1995, 9,000 fraternal acts of service               
 were performed, equaling 57,000 hours, and they dispersed over                
 $225,000 for charitable activities.                                           
                                                                               
 Number 106                                                                    
                                                                               
  CHAIRMAN TAYLOR  noted some states allow for survivorship on                 
 ownership of assets and sometimes the estate plans are made up                
 jointly with survivorship provisions in them.  He questioned                  
 whether SB 119 would change any of those provisions.                          
                                                                               
  MARIANNE BURKE , Director of the Division of Insurance, Department           
 of Commerce and Economic Development, replied that SB 119 will                
 bring Alaska law into compliance with IRS regulations for estate              
 planning.                                                                     
                                                                               
 Number 123                                                                    
                                                                               
  CHAIRMAN TAYLOR  asked whether her staff has actually researched             
 whether SB 119 will bring Alaska into compliance.   MS. BURKE                 
 replied SB 119 is based on the NAIC Model Act which was developed             
 and researched with the IRS, on a nationwide basis, to ensure                 
 compliance with both FCC and IRS requirements.  She added the                 
 Division believes it is better to repeal and reenact to make sure             
 this was in compliance with those provisions.                                 
                                                                               
  SENATOR MILLER  moved CSSB 119(L&C) from committee with individual           
 recommendations.  There being no objection, the motion carried.