Controversy Over Federal Life Insurance Benefits

On Friday, GovExec Retirement Planning columnist Tammy Flanagan wrote about "retained-asset accounts," in which insurance benefits are paid not as a lump sum, but held in an account from which beneficiaries can withdraw funds using what appear to be checks. Federal and military life insurance benefits are distributed in this fashion, but many people don't know the funds aren't protected by the FDIC, and if beneficiaries don't immediately use one of the "checks" to transfer funds elsewhere, insurance companies invest the money at a profit.

On Saturday, the Wall Street Journal reported the Veterans Affairs Department is sending letters to 10,000 beneficiaries of life insurance policies of military service members to explain how its vendor, Prudential Financial Inc., uses such a system to distribute benefits. And VA officials have set up a working group with the company to assess whether any changes need to be made to the system.