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The In-Service Alternative Rollover: Protecting The Value Of Your 401(k)

Remember your parents and grandparents’ pensions?  What if you could have some of the same benefits that they enjoyed from their pension, with your 401(k) dollars?

Pensions gave an identifiable, calculable benefit.  Typically, pensions were based on age and years of service, multiplied by an average salary.  Unlike today’s retirement plans, the benefits of pensions were not directly dependent on the stock market.  Retirement today is vastly different.

About 30 years ago, employers began shifting from traditional pensions to 401(k) plans.  The main reason: cost.  You see, the employer was responsible for guaranteeing pension benefits to employees. Your father and grandfather (or grandmother) contributed nothing.  If the stock market crashed, then the employee did not care, at least not as far as his or her retirement was concerned.  The reason: pension plans were not tied to the markets.

With a 401(k) plan, employers require employees to provide the contributions.  In some cases, employers will match a certain amount of what you contribute.  But that is the catch – the employee has to pay for it.  And that’s not all!  With a 401(k) plan, who bears the risk of a market decline: the employee.  A falling market could at best delay your planned retirement.  And a market decline after you retire could severely impact your standard of living.

At Zwick Law, in coordination with a financial professional who is experienced with the process known as an In-Service Alternative Rollover (ISAR), we may have the answer.  We may be able to restore some of the traditional pension-like benefits that your parents and grandparents enjoyed.  Benefits such as guaranteed, knowable monthly income, regardless of market performance.  That means, with our assistance — and the guidance of an ISAR-experienced financial planner — you can:

  • know for certain what you can depend on in retirement;
  • take comfort in guaranteed, continued payments to a spouse, if elected;
  • eliminate (or at least reduce) market worries – while a rising market may benefit you, a falling market does not impact the guarantees; and
  • obtain peace of mind before and during your retirement.

The In-Service Alternative Rollover (ISAR) is a legal process that, with the help of an ISAR-experienced financial professional, may protect your 401(k) benefits. To learn more about the ISAR process and whether it may be right for you, contact Attorney C.J. Zwick for more details.

Zwick Law is a full-service law firm with offices in DuBois and Brookville, Pennsylvania.  The attorneys at Zwick Law routinely represent corporations, associations, municipalities and individuals across Pennsylvania and West Virginia.  Find out more about Zwick Law by visiting https://zwick-law.com.

BREAKING NEWS: Increase in UIM Policy Limit Considered a ‘Purchase’ Requiring New Stacking Waiver

UIM Coverage

On February 5, 2018, the federal District Court for the Eastern District of Pennsylvania ruled that an increase in Under Insured Motorist (UIM) benefits is a new purchase of insurance coverage.  As such, automobile insurance carriers are required to obtain a new waiver of the stacked benefits under the auto insurance policy.

Stacked benefits, in UIM coverage, means that a person who purchases automobile insurance on more than one vehicle under the same policy can elect to purchase up to double the UIM insurance coverage.  The Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”) requires an insurance carrier to offer stacked benefits to every policy holder who purchases insurance.  If the policy holder decides not to take advantage of the stacked benefits, the insurer must obtain a written waiver of those benefits.

For instance, if you insure two cars for $20,000.00 each, you are eligible for stacking benefits that would allow you claim up to $40,000.00 on each vehicle.  The MVFRL requires that the insurer offer this option to each and every insured.

If the insured declines, then the insurer must obtain an express written waiver of the option to purchase “stacked” benefits.

According to the Pennsylvania Eastern District Court in Barnard v Travelers, No. 17-00290, whenever an insured chooses to increase the amount of coverage under her UIM policy, the insurance carrier must obtain a new written waiver of stacked benefits as required by the MVFRL.

Background

Michelle Barnard, the Plaintiff in this case, held a UIM policy with The Travelers Home and Marine Insurance Company, the Defendant, since 2007.  When she initially secured the policy, she had UIM coverage limits of $50,000.00 for each of her two vehicles.

At the time of purchasing the initial insurance coverage, she signed a written waiver of stacked benefits under that policy, i.e., Ms. Barnard waived her right to stack UIM benefits under her policy.  With that, the maximum amount of UIM benefits that she could claim, and ultimately receive, under her policy was $50,000.00.

However, in May 2009, Ms. Barnard increased her third-party liability coverage limits under the policy from $50,000.00 to $100,000.00 on each insured vehicle.  So, this meant she would have been entitled to claim up to $200,000.00 on each car, as per her allowable stacked benefits.  Notably, Ms. Barnard did not sign any written waiver of her stacked benefits upon this increase in coverage.

Thereafter, when Ms. Barnard was injured in a car accident on June 17, 2016, she submitted a UIM claim under her policy with Travelers Insurance.  Travelers tendered $100,000.00 in UIM benefits to Ms. Barnard, assuming that she had waived her option to stack her UIM benefits in 2007.  Ms. Barnard, however, rejected this tender and, claiming that she was entitled to more than was tendered, she sued the Travelers.

Increase in UIM limit is a ‘Purchase’

Travelers argued before the Eastern District Court that, among other things, it had no duty to obtain a new waiver of stacked benefits under the policy, even after Ms. Barnard had increased her liability insurance coverage limits in 2009.  In other words, Travelers claimed that the initial 2007 waiver was still in operation and effective, despite the increased coverage purchased by Ms. Barnard in 2009.

The federal district court, however, rejected Travelers’ argument.  Judge Gerald McHugh held that the language of the MVFRL requires a renewed waiver of stacked benefits when liability coverage limits are increased and/or purchased.

According to Judge McHugh, because an increase in coverage under an existing policy requires that an insured pay a higher premium, an increase in coverage limits also qualifies as a “purchase” as defined by the MVFRL.  As a result, the court ruled that Travelers should have obtained a new waiver of UIM stacked benefits, in 2009, when Ms. Barnard increased her liability insurance limits.  Pursuant to the district court’s ruling, Travelers was responsible, and required, to pay Ms. Barnard up to $200,000.00 in UIM benefits under her policy.[1]

For questions relating to the MVFRL and Pennsylvania auto insurance coverages, please contact Matthew R. Zwick, partner of Zwick Law, at (814) 371-6400 or mrz@zwick-law.com, to schedule a legal consultation.  At Zwick Law, we’re always here for you.[2]

 

[1] Note: Travelers filed an appeal of the district court’s decision to the United States Third Circuit Court of Appeals, which remains pending at the time of publication of this article.

[2] Disclaimer: The use of the Internet, Facebook and/or any other form of social media communication with the firm or any individual member of the firm does not establish an attorney-client relationship.  Time-sensitive information should be directed immediately to the office of Zwick Law at (814) 371-6400.