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 119 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.