Monthly LRA Update

LEGISLATIVE DEVELOPMENTS

Government Infrastructure and Tax Legislation Update

On August 10 the Senate passed the bipartisan INVEST in America Act (H.R. 3684). At present, the bill is expected to receive a House vote in conjunction with the passage of the additional $3.5 trillion budget reconciliation measure.

On August 24 the House voted to approve the fiscal year 2022 budget resolution that provides reconciliation instructions. The resolution had been passed by the Senate on August 11. Next, the House Ways and Means Committee and the Senate Finance Committee will work to draft reconciliation legislation. A non-binding target of September 15 has been identified for this legislation.

The Senate Finance Committee has been given an instruction to reduce the deficit by $1 billion over ten years. It remains anticipated that this will be accomplished, at least in part, by raising corporate tax rates and taxes on wealthy individuals.

ACCOUNTING DEVELOPMENTS

Bank Accounting Advisory Series Updated

On August 16 the OCC released an update to its Bank Accounting Advisory Series (“BAAS”). The BAAS addresses a variety of accounting topics, with an objective of promoting consistent application of accounting standards among banks.

We have confirmed that the updates do not relate to BOLI/COLI programs. Material updates include the following:

According to the press release, the BAAS does not represent rules or regulations of the OCC. Rather, it represents the OCC Office of the Chief Accountant’s interpretations of GAAP.

JUDICIAL DEVELOPMENTS

USAA Class Action COI Settlement Approved

As we reported in our April 2021 LRA Update, the parties in Spegele v. USAA Life agreed to a class action settlement. The plaintiffs alleged that USAA violated the terms of its universal life insurance policies by deducting COI charges in amounts greater than the policies authorized.

The policies in scope included a provision stating that COI rates would be determined by USAA Life “based on its expectations as to future mortality experience.” Plaintiffs alleged that USAA Life included additional, unauthorized factors in setting the COI rates, including undisclosed maintenance and administrative expense factors.

The parties reached a $90 million settlement. On August 26 the Court issued its final orders and judgments, granting approval of the settlement and awarding attorneys’ fees in the amount of 30% of the settlement (or $27 million). The Court also granted the Class Counsel’s request for reimbursements in the amount of ~$176k.

The named plaintiff (Roy Spegele) was awarded an incremental $20,000 payment for his contributions to the litigation on behalf of the class.

Docket: Spegele vs. USAA Life Insurance Company, Case No. 5:17-cv-967-OLG