Faculty insurance 'unfair'
(EDITOR'S NOTE: The following is an analysis of the insurance and retirement programs available to university and college faculty members in Kansas through the Teacher's Insurance and Annuity Association.)
By RICK PENDERGRASS
Kansan Staff Writer
Faculty members of Kansas colleges and universities are a select group-by law they are exempt from paying taxes on life insurance.
A bill signed into law April 15 by Governor Robert Docking exempted the company, and, consequently its policyholders from the standard two per cent premium tax on life, medical and disability insurance.
The tool some members use to pry themselves from the tax burden is the Teacher's Insurance and Annuity Association, an insurance company designed to cover only college and university faculty.
T. I.A.A. is exempt in Kansas as in 48 other states from paying taxes because it is a non-profit organization serving "the needs of higher education." The only state which does not recognize this exemption is New York—the home state of the T.I.A.A.
Didn't register activities
Until Senate Bill 105 was signed, T.I.A.A. did not have to register its activities with the Kansas Commission of Insurance, Frank Sullivan, commissioner of insurance said.
The bill lists four points the company must adhere to to be exempt from the tax.
Fletcher Bell, assistant commissioner of insurance explained the four points of the bill, "The first three points will enable us (Insurance Commission) to have a record of the business T.I.A.A. does in the state, which we have never previously had.
"The fourth point, concerning the Commissioner of Insurance as the lawful attorney for the company (T.I.A.A.) was written in for the protection of the residents of the state of Kansas.
"Without that provision, any Kansas resident bringing legal
action against T.L.A.A. would have to go to New York where the company is licensed. That would naturally be expensive," Bell said.
Bill lists four points
The four points of the bill as listed are:
- Payment of an annual registration fee of $500.
- Filing a copy of the form of any policy or contract issued to Kansas residents with the Commissioner of Insurance.
- Filing a copy of its annual statement prepared pursuant to the laws of its state of domicile, as well as such other financial material as may be requested with the Commissioner of Insurance.
- Providing for the Commissioner of Insurance as its lawful attorney upon whom may be served all lawful process in any action by a Kansas citizen.
Bell said though T.I.A.A. is not mentioned by name in the bill, the exemption was designed to apply particularly to that company.
The bill states in its exemption clause;
"Any life insurance company organized and operated, without profit to any private shareholder or individual, exclusively for the purpose of aiding and strengthening educational institutions...
"... by issuing insurance and annuity contracts directly from the home office of the company, without insurance agents in this state, only to or for the benefit of such institutions and individuals engaged in the services of such institutions."
Loyd Hall, executive director of the Certified Life Underwriters in Kansas, said any exemption for T.I.A.A. is unfair because it sets aside a group of people as a select few.
Exemption unfair
He said because the company is non-profit there is no reason for it to be exempt from taxes. All of the large mutual insurance companies are non-profit. He gave as an example the Prudential Insurance Company of America, one of the largest in the country.
An attempt to get opinions from KU faculty members concerning the fairness of the program brought only comments about T.I.A.A.'s retirement plan.
Several KU faculty members who wished to remain anonymous, commented on the mandatory CREF program at KU.
Faculty complains
"I don't like the retirement program here—as far as being forced to take it," one instructor explained, "before I came to KU, I had a good retirement program of my own set up. Why should I be forced to part with that much extra money I could be using now?"
A professor had a different view, "I don't mind putting the money into the retirement fund. I'm sure T.I.A.A. can invest it better than I could, and I don't need the extra five per cent now anyway," he said.
Raymond Nichols, vice-chancellor of finance, explained the University's official policy about T.I.A.A., "The only connections we have officially with the company is through the CREF program. Since we cannot interfere in any way with the company's other business, we are not concerned with their life insurance."
Professors at KU can take the insurance offered by T.I.A.A. only through individual contracts, and since there have been no records kept in either the state offices or at KU of insurance contracts, there is no way of knowing how many faculty members at KU are insured by the company. Senate Bill 105 will make the names of those individuals a matter of record.
Nichols said KU had officially endorsed a bill in the U.S. Senate still under debate, which would exempt the company as a government charter throughout the nation.
The bill, backed in congress by Senators McClellan, Fullbright, Dirksen, Hatfield, Kennedy, Mansfield and others deals primarily with the retirement plan of T.I.A.A.-CREF but would cover the company's insurance business as well.
Nichols said the University endorsed the bill only to the point of promoting a uniform program of retirement for professionals in higher education.
Hall, Sullivan and Bell agree on the merits of a uniform retirement fund, but oppose tax exemption for insurance premiums.
Commenting on the bill in the U.S. Senate, Bell expressed fears
that other companies would use the bill as a precedent to become exempt from taxation. He said the amount of revenue the state and federal governments are losing from the current tax exempt status of T.I.A.A. would be nothing to the potential loss of tax dollars if the larger companies were exempted.
Sibelius opposed
Sibellius opposed Among' those opposed to (Continued to page 7)
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