A Reaction on the Bailing-out of Pre-need Industry
The concept of pre-need plans is a savings mechanism in order to secure future needs. Pre-need companies offer plans that provide for future educational costs, pensions upon retirement, and memorial services upon the demise of its plan holders.
Just lately, the pre-need companies experienced controversies for the senate found out that’s some of these companies can no longer accommodate the needs of the plan holders due to their financial struggles.
Among the causes of the collapse of the pre-need industry are the following: (1) deregulation of the tuition fees in 1992 that led to the skyrocketing tuition fees, (2) lower interest yields on trust fund investments due to the 1997 Asian financial crisis, (3) weak regulation, (4) inappropriate accounting practice, (5) collusion among pre-need companies and their affiliates, and (6) corporate indiscretion.
The deregulation of the tuition fees exacted heavy toll on the finances of pre-need companies enjoyed significant gaps between tuition fees and ROI. The gap stared to narrow after the deregulation in 1992. Tuition fee and ROI began to equalize by 1997. By 2004, the gap had widened causing the variance of almost 20%. The adverse impact of the deregulation of tuition fees took 10 years to fully materialize as trust funds and sales could no longer cover the mounting obligations. On the other hand, the Asian financial crisis broke out in 1997 causing a slowdown in the economy of countries in the Asian region including the
Philippines. The stock market crushed and wrecked the trust fund investments of the pre-need industry. The SEC is partly to blame for the collapse of the PNCs. As a regulatory body, the SEC could have pre-empted some of the problems, such as the defects in the traditional or open-ended educational plans, the inappropriate accounting practices and the possible collusion between the trustee banks and the PNCs. However, the SEC intervened too late. According to the SEC, the entire pre-need industry used aggressive accounting practices which understated liabilities and tended to present a rosier financial picture than warranted. As a corrective measure the SEC in 2002 imposed the use of the Pre-
Need Uniform Chart of Accounts (PNUCA) as a standard for reporting of finances and liabilities. With the PNUCA in place, pre-need educational and pension plans were no longer treated as investment contracts but as insurance contracts, subject to the Actuarial Reserve Liability (ARL) scheme. These changes in accounting methods further weakened the financial statements of the pre-need companies, and effectively constrained their investment activities.
The push for Congress to pass legislation protecting the rights of employees and their retirement was inevitable. Retirement plans are extremely important for all working individuals. Having funds to keep or exceed ones current standard of living and to enjoy one’s life beyond expectations after retire...
report of the national commission on the causes of the financial and economic crisis in
Allan and Davis mention the spike of college cost since 1995 has increased by 150 percent; student debt has increased 300 percent since 2003, and with education, second to the mortgage industry in the nation’s debt, America needs to redirect their attention to the future and focus on education (Allan n. pg). Budget cuts from national to state
Q2. What caused the existing cost system to fail in the 1980's? What are symptoms of Cost System Failure?
Tuition is the cost to take classes at a college or university and is the most expensive part of a college education as it makes up 60 % of the overall price tag (Bashkar and Gopalan). Tuition has become increasingly more expensive over the years and has increased by nearly 500% since 1986, which is far more than inflation or tuition (Willie). The question is, why has there been such a mas...
Today two thirds of college students need to take out loans to pay their tuition. Inflation on college tuition has more t...
One of the causes were Uneven Prosperity, 0.1% of families made 100,000$ a year, and 80% had zero savings. 200 companies controlled 49% of all U.S industry
The skyrocketing price of college tuition is causing a tremendous concern over whether higher education will be a viable financial concept to the average citizen over the next decades. Some families have opted to explore different means of obtaining a higher education for their children as these costs escalate. There is overwhelming evidence that colleges need to restructure the way they are run because tuition prices are increasing at a rapid rate causing changes in the way students fund their education and in the way the government provides educational subsidies.
United States. Joint Economic Committee. College Affordability: Tuition Tax Credits vs. Saving Incentives. 1997. Web. .
The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.
During the 1920s, approximately 20 million Americans took advantage of post-war prosperity by purchasing shares of stock in various securities exchanges. When the stock market crashed in 1929, the fortunes of many investors were lost. In addition, banks lost great sums of money in the Crash because they had invested heavily in the markets. When people feared their banks might not be able to pay back the money that depositors had in their accounts, a “run” on the banking system caused many bank failures. After the crash, public confidence in the market and the economy fell sharply. In response, Congress held hearings to identify the problems and look for solutions; the answer was found in the new SEC. The Commission was established in 1934 to enforce new securities laws that were passed with the Securities Act of 1933 and the Securities Exchange Act of 1934. The two new laws stated that “Companies publicly offering securities must tell the public the truth about their businesses, the securities they are selling and the risks involved in the investing.” Secondly, “People who sell and trade securities must treat investors fairly and honestly, putting investors’ interests first.”2
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The Panic of 1893 brought up the most severe depression the nation and YET experienced. In March 1893 when a company was unable to meet payments on loans, declared bankruptcy. After a few more months, another company failed too. This triggered a collapse of the stock market. A wave of bank failures soon began. It caused a contraction of credit, which meant that many of the new, aggressive, and ...
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One of the first steps toward college reform is to begin adjusting our tuition rates accordingly. Many college institutions have steadily raised the cost of tuition resulting in many students to have difficulties paying for college across the United States. Tuition rates have been a huge barrier for college undergraduates: "Over the past three decades, tuition at four-year colleges has more than doubled, even after adjusting for inflation" (Fact Sheet). Tuition is steadily increasing, causing college to become more expensive than in previous decades. Instead of helping Americans who have a desire to attend an educational institution, the government is slowly making it harder to attend and pay for college. High Tuition is preventing college undergraduates from obtaining a degree, causing many to be in a financial crisis when taking into account student loans and paying for tuition. Having high inflation rates in the economy is only making it worse and more difficult to get a higher education. The government would undoubtedly want to see improvements in employment rates within the United States, yet when Americans are trying desperately to obtain a degree, they have to deal with the overwhelming, costly tuition rates that have caused many to slow graduation and make college students pile up more debt than necessary. Thus, students often worry about debt