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State advocacy is where the rubber meets the road…

January 22, 2019

In previous posts this month I’ve outlined the Alliance’s key 2019 strategic goals for federal advocacy and member education and networking. But it’s state legislative and regulatory issues that can have the most significant impact on your society’s financial and fraternal operations, and the Alliance is actively engaged in these matters on a variety of different levels. The Cliff Notes summary of our state advocacy goals can be summed up like this: Defend the Goal; Strengthen the System; Spread the Word.

Here’s a rundown on each of these objectives:

  • Defend the Goal – In 2018 we saw legislation introduced in two states – Oregon and South Dakota – that would have amended or outright repealed the fraternal tax exemption. Thanks to the engagement of both large and small members, we were able to defeat both measures. And while the situation in South Dakota seems to have calmed down so far this year, we are keeping a very close eye on Oregon. We may see a reprise of a bill aimed directly at fraternals, or a larger proposal that targets a wider variety of non-for-profit organizations. In either case, the Alliance will be ready with professional advocacy from our retained lobbyist supported by grassroots contacts from member society field representatives and local chapter leaders.

    In addition, another potential challenge rose with the publication of the Colorado Office of the State Auditor Evaluation Report on the fraternal exemption. You can access a copy of the report here.

    The COSA Report examines the history and purpose of the fraternal exemption and evaluates whether the exemption is meeting its purpose. The Alliance, aided by members including Thrivent, Knights of Columbus, Modern Woodmen of America, WoodmenLife, and Colorado domestics Assured Life and WSA Fraternal Life, provided COSA with responses to more than a dozen questions auditors asked about the exemption.

    COSA’s evaluation found “the Fraternal Society Exemption is likely meeting its purpose.” This is a very positive result; COSA determines “fraternals continue to provide benefits to society through their insurance, social and charitable activities.” It acknowledged, however, that “fraternals provide a much smaller share of the insurance market and have a significantly smaller economic and social impact today than they had during the time the exemption was created.” Finally, COSA suggested, as a result of the significant reduction in fraternal membership in Colorado and nationally, “the General Assembly may want to consider reviewing the Fraternal Society Exemption due to its age and the large changes in the role of fraternals in society and the insurance industry since it was created to assess whether the exemption continues to serve a valid purpose. ”At this point, the relatively small economic impact of the current fraternal exemption and the COSA finding that the exemption is likely meeting its purpose has mitigated interest in the report among legislators or the news media. Nonetheless, COSA’s suggestion that lawmakers may want to review the exemption in light of its age and the significant societal and financial services changes that have taken place since it was enacted is concerning. The Alliance will keep a keen eye out for any interest this report may generate, including bill introductions or inquiries from public policymakers.

    If nothing else. I hope this report prompts each Alliance member to take a close look at the impact of its community service programs and assess the value the fraternal exemption provides your members and, more importantly, the communities in which they live and work. Being armed with the facts about what it fraternal contributes to its members and society is the best defense against any possible attacks on our organizational model.

  • Strengthen the System – One of the best ways to mitigate potential legislative and regulatory threats to the fraternal model is to ensure regulatory oversight on key issues – solvency, for instance – provides equally strong protections for consumers as systems for commercial insurers. Following the successful enactment of solvency legislation in Minnesota in 2018, one of the Alliance’s top priorities in 2019 is enactment of fraternal solvency legislation in three other key fraternal states – Pennsylvania, Wisconsin, and Texas. Here is a quick rundown on the status of those measures for each state:

    • Pennsylvania – We expect to reach an agreement on final legislative language for the bill with state regulators soon and confirm whether the PA DOI intends to introduce the legislation as part of its omnibus bill or whether it expects the Alliance to lead the effort to enact the legislation. In either case, we will work with the Pennsylvania Fraternal Alliance to secure support for the measure among legislators and move the bill forward in the 2019.

    • Wisconsin – We are very close to reaching agreement on final legislative language and confirming the DOI’s intent to introduce it as part of its omnibus bill. The appointment of a new commissioner should put this effort back on the fast track.

    • Texas – We are close to reaching agreement on final legislative language for the bill and our state lobbyist is working with the state Legislative Counsel’s office to put this language into bill form and secure sponsors for the measure. We have secured the support of the Alliance’s domiciled members and the Texas Association of Life and Health Insurers (TALHI) and expect to be in a position to introduce the measure early in the 2019 session. We will discuss the proposal in detail during the Alliance’s February 28 “Meet and Eat” event in San Antonio.

  • Spread the Word – I firmly believe that an ounce of prevention is worth a pound of cure, and in 2019 we’re going to invest our ounce in a new cooperative program with the National Association of Fraternal Insurance Counselors (NAFIC) which will bring members of the fraternal community – executives, employees, local chapter leaders, field representatives – to two state capitals for “Day on the Hill” events. These one-day programs will be designed to spread the fraternal message to state lawmakers before legislation that could damage the fraternal community is introduced. We also hope it may inject some energy into State Fraternal Alliance’s that may be looking to wrap their arms around an updated advocacy mission. Stay tuned for more details on this new initiative.

Got comments, questions, concerns, suggestions to make the Alliance more responsive to your needs? Send them to me at jannotti@fraternalalliance.org.