10 pre-need companies on SEC watchlist

The Securities and Exchange Commission (SEC) is closely monitoring 10 other pre-need companies that offered open-ended educational plans in light of reports that some of them are experiencing liquidity problems.

Apart from Pacific Plans Inc. and College Assurance Plans, other pre-need firms on the SEC’s watchlist are Platinum Plans, TPG Corp., Prudential Life Plans, PET Plans, Eternal Plans, Eduplan Phils., Legacy Consolidated Plans, Pryce Plans, Trusteeship Plans, and Scholarship Plan Phils.

These pre-need firms offered a total of 796,263 open-ended plans worth P30.037 billion. When combined, the actuarial reserve liabilities (ARL) of these companies amounted to P32.76 billion of which CAP accounted for P23.25 billion.

The ARL is the present value of all current and future tuition availments. It is based on inflation, interest rates, and expected tuition fee increases, among others.

A measure of how healthy a pre-need company is whether its trust fund is equal to or exceeds the ARL. The trust fund is the pool of premium payments from planholders that had been invested.

In open-ended plans, a pre-need firm pays the tuition of a beneficiary regardless of the amount. Before 1992, tuition increases were limited to no more than 15 percent each year.

When tuition fees were deregulated in 1992, most of the pre-need companies stopped selling the open-ended educational plans.

An SEC official said complaints have been piling against Platinum Plans for delayed or non-payment of obligations to planholders. Some investors have even questioned the luxurious cars and the frequent travels of the company’s top officials.

There were also reports that Platinum Plans has been remiss in paying its employees.

Following the collapse of Pacific Plans, the SEC has stepped up its monitoring over pre-need plan firms to ensure their compliance with existing regulations.

For one, the SEC will conduct on-site audits on pre-need companies to confirm the veracity of financial information submitted to the corporate watchdog agency as part of additional measures to safeguard the interest of the investing public.

Some lawmakers, however, are blaming the SEC for being remiss in its duty to monitor and supervise the industry, now plagued with controversies arising from the financial difficulties facing pre-need firms.

Nevertheless, the SEC said it remains committed to protecting the interest of investors.

Many fear that Pacific’s Plan filing of a petition for suspension of debt payments and rehabilitation could be a precedent to other pre-need firms encountering cashflow problems to evade their responsibilities to planholders.

The number of pre-need firms licensed by the SEC to sell securities to the public dropped to 33 from 42 last year.

Among the companies that are not licensed to sell pre-need plans are Platinum Plans Inc., Celestial Memorial Plans, East Asia Plans, FCM Plans Inc., Garden of Memories Memorial Plans, Gillamac Life & Pension Plans, Pension & Retirement Plans Corp., Samson Memorial Plans, and Special Plans.