Life Insurance Benefits Withheld: VA Agreed
According to government documents, the Department of Veterans Affairs agreed in September of 2009 to allow Prudential Financial to withhold lump sum payments of life insurance benefits owned to survivors of service members. The documents were made public through the Freedom of Information Act according to the article "VA Agreed to Withholding of Benefits, Documents Say" by Bloomberg News found on the NY Times website.
Prudential believes they have been in compliance but somewhere there has been a breakdown of information because many are under the impression that survivors should be receiving a lump sum death benefit as opposed to check books to access the money slowly. Prudential keeps the majority of the money to accrue interest over time. Since 1999 Prudential has been using these retained-asset accounts and keeping the money in a general corporate account.
Under the original contract with the government back in 1965 Prudential was to give a lump sum payout. Bloomberg Markets Magazine reported in their November issue that a Sept 2009 amendment to the contract with the veteran's department revealed the deal struck between the insurance company and government a decade earlier. It was apparently never put into official writing.
Bob DeFillippo, a Prudential spokesperson, says the company was in compliance with its contract with the Department of Veterans Affairs. Investigations are under way to determine what happened and see where the breakdown of communication occurred. Families may be entitled to lump sum payouts, but nothing will be finalized until the investigation is completed. There is a lot of information to go through and it will take time to determine the correct course of action at this point.