A PACKAGE ARRIVES

in Great Mills, Maryland. Cindy’s son Ryan was 24 years old. He was killed by a bomb in Afghanistan.

The package is a thick envelope, 9 x 12 inches. Cindy opens it. Inside is what looks like a checkbook and a letter: Ryan has a $400k policy. It is already in a convenient interest-bearing account. You can hold the money in the account for safekeeping as long as you like.

Are you paying me off because my son was killed? Six months later, opening the checkbook, she tries to buy a bed. The check is dishonored. On Armed Forces Day, she tries to buy a camera. The check is dishonored.

The money isn’t sitting in a bank. It’s sitting in Prudential Financial’s investment account. Prudential handles life insurance for the Department of Veterans Affairs. The money is earning investment income for Prudential. It is paying Cindy 1% interest and other families 0.5%. It is earning Prudential 4.8 to 5.69%.

Cindy, you can hold the money in the account for safekeeping for as long as you like. After Ryan died, he received a Purple Heart and a Bronze Star for saving fellow soldiers.

Retained-asset accounts are standard operating procedure. Not just for Prudential: MetLife says To help you through what can be a very difficult, emotional and confusing time, we created a settlement option, the Total Control Account Money Market Option. It is guaranteed by MetLife.

It is not in a bank. It is in Metlife’s corporate investment account. All guarantees are subject to the financial strength and claims-paying ability of MetLife.

Ryan realized that it was a roadside explosive. He ordered the Humvee to swerve but he was exposed and it blew up.

Bob the Prudential spokesman says For some families, the account is the difference between earning interest on a large amount of money and letting it sit idle.

Inside the package is what looks like a book of checks. But what they are is a book of IOUs from Prudential. Printed on them is the name of J.P. Morgan-Chase even though the money is not actually in the bank.

Three days after Ryan died, there was a knock on Cindy’s door. An Army casualty assistance officer says Ryan has a life insurance policy. They need Cindy’s signature to release the money.

Prudential never mentions to Cindy that, under a 2008 law, survivors are allowed to put death benefits into an Individual Retirement Account that earns them investment gains for the rest of their lives tax-free.

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Jeff took his own life after coming home from Iraq. A month before, his parents Kevin and Joyce had him committed to the Department of Veteran Affairs hospital but it discharged him after a few days. Two weeks later, his parents found him in the cellar hanging from a hose. Lying on his bed were the dog tags of two unarmed Iraqi prisoners Jeff said he was forced to shoot.

Less than two weeks after Jeff died, Kevin and Joyce received a package with what looked like a checkbook. We just put it into a drawer, because we had enough to deal with. The account people estimate that Jeff’s life insurance was earning Prudential 5.69% in investment income. Whether it’s illegal, that’s up to a court to prove says Kevin. I can’t understand how any company, especially Prudential, would ever try to make profit off our son’s death.

Prudential runs the program on a cost-reimbursement basis only says Stephen, deputy assistant director for insurance at the Department of Veteran Affairs. They’re really good guys. They do it patriotically. They don’t make any money from the Alliance account.

State bank regulators say that if we need reform, then insurance departments should make it. But officials often say that they don’t understand what a retained-asset account is.

Stephen’s been working with insurers for most of his career. It took him more than a decade to understand how retained-asset accounts work.

Gerry is former president of MetLife Marketing. He also invented retained-asset accounts back in 1984. He says that MetLife makes $100-300 million a year on death benefit investment returns. The company [wins] because we … make a nice spread on the money.

Over in Connecticut, Kurt says I think they’re just trying to offer some flexibility to the beneficiary. Kurt is state insurance department manager for market conduct.

I haven’t heard a plausible argument about why [retained-asset] accounts are better for the consumer says Joel, the Pennsylvania Insurance Commissioner.

In Washington, Michael is Senior VP for regulatory policy at the Conference of State Bank Supervisors. Quite honestly, we deal with issues that our members want us to deal with he says. This is not one that has drawn their attention.

Over at the Department of Veteran Affairs, Stephen thought that the money went into a bank. Maybe I didn’t ask enough questions he says.