The Pasco School District just discovered the accuracy of the adage that if it's too good to be true, it probably is. Administrators have pulled the plug on a private vendor's proposal offering no-cost life insurance to the district's 9,000 employees after the state Office of Insurance Regulation questioned its legality. It never should have gotten that far.
The convoluted plan called for an unidentified insurance company in Bermuda to issue policies and pay survivor benefits to an off-shore trust in the Cayman Islands instead of directly to the district or its employees' families. Essentially, the district had no guarantee of ever receiving a dollar under the arrangement, the Office of Insurance Regulation said.
Fortunately, the Pasco School Board never committed to the plan, proposed by Ohio-based Pollock Financial Group. Administrators acknowledged they were leery, but they still felt confident enough in the concept to plug it into the 2013-14 workers' contract as an additional employee benefit. They should have continued the skepticism.
As proposed, private investors would have put up $400 million to underwrite the policies. Those benefactors then would recoup tax-free returns on the premium investments while employees received an $87,500 life insurance benefit at no cost. Questions arose after the idea became public when Swiss Re, one of the world's largest reinsurance firms, disavowed a role in the plan despite statements to the contrary by Pollock representatives to Pasco school officials.
Due diligence from state insurance regulators uncovered more potential problems. Pollock Financial Group owner Mark G. Pollock and the man described as "the architect of this entire program,'' Rene Stuifzand, both filed for Chapter 7 bankruptcy in 2012. Stuifzand also has been entangled in civil allegations of fraud in lawsuits filed in New York and Illinois. Two others, William A. Kelly and Derek Siewart — identified as team members in earlier versions of the program presented to the Pasco district, the city of Sarasota and the Gulf County School Board — agreed to pay $80,000 fines in Pennsylvania after a similar legacy life insurance plan for unionized works there violated state law.
There were many red flags, and the district wisely retreated from a scheme that potentially could enrich investors without guaranteeing benefits to the surviving families of teachers, custodians, bus drivers and other school workers. The Pasco School District is spending nearly $600,000 this year to buy $35,000 life insurance policies for all employees. Providing benefits to valued employees is an accepted cost of running a private business or a public agency. Getting someone else to assume that expense was wishful thinking.