From Sunday's Whistleblower column: 

After Lloyd Marengo’s wife died in June, their three children received a payout from a life savings insurance program the couple chose 30 years ago at City and County Credit Union. Marengo, 92, expected the same thing would happen when he passes away.

He contacted Whistleblower after he read about Helen Moosmann, 92, who had a similar insurance product, which CUNA Mutual Group canceled and was no longer going to honor after Dec. 31.

“I wondered if our credit union was in the same boat, and apparently different credit unions have different conditions,” said Marengo, of northeast Minneapolis.

Marengo’s insurance policy is also being canceled. But unlike Moosmann, who simply had to leave $2,000 in a savings account, Marengo’s credit union deferred interest from his account in order to pay for a portion of the premiums.

Now the St. Paul-based City and County Credit Union said CUNA Mutual’s decision to no longer honor life insurance policies has them scrambling to figure out how they will make this right for the 500 members affected by the cancellation, especially since most are seniors.

“It has put us in a very difficult situation,” said Matt Schewe, vice president of member experience. “At City and County we still haven’t figured out what we are going to do. We truly do care about our members, and if this is going to negatively impact them, it will also impact the credit union and the cooperative.”

In Marengo’s case, the credit union estimates they deferred about $1,100 to pay for a portion of the premiums. The credit union paid $3,000, Schewe said.

Since 1938, CUNA has offered the “life savings insurance” to credit unions and its members nationwide. Phil Tschudy, a spokesman with Wisconsin-based CUNA, told Whistleblower two weeks ago that the program was not “sustainable going forward.”

This week, Tschudy said the policy is “not a guaranteed benefit that members were promised for life.” The policy is a term life product, with a one-month term that can “be canceled by either the credit union or insurance carrier with a 30-day notice,” Tschudy wrote in his message.

“It was not designed as a whole life product and does not guarantee continued coverage until death,” Tschudy said.

Since 2010, Tschudy said 900 credit unions have discontinued the life savings insurance.

“After more than 75 years, the time has come to discontinue this product,” he said.

Schewe said instead of canceling the policy like other credit unions had chosen to do, it decided to use interest from the savings accounts to defer some of the premium costs. Some years they only deferred a portion of the earned interest. But during tough economic times like the Great Recession, Schewe said, all the interest was deferred.

“Yes, we deferred, but we were genuinely convinced that it was going to benefit [Marengo’s] heirs,” Schewe said.

Tschudy said some members feel they are getting nothing for the interest income they lost.

“Actually, members did receive a benefit,” Tschudy said. “They received life insurance coverage for every month they participated, and their beneficiaries would have received the death benefit if the member had died during that month. That is how term insurance works.”

Some credit unions, such as US Federal Credit Union, have decided to stop honoring the product after the end of the year. Schewe said City and County Credit Union will honor the policies until June 30.

At the very least, Marengo wants to see the interest returned to the account.

“It’s out of my control, but it sounds like they are working on something,” Marengo said.

When they first signed up for the insurance product, Marengo said, it was their only life insurance. But he said he and his wife eventually bought other insurance policies that pay for funeral costs. Now, the $2,000 payout was just “a little something” to leave his children.

Tschudy said the credit union will decide within the next month if they will return the interest.

“At this point, everything is still on the table for us,” Schewe said. “For me, this is important enough to make sure we are doing the right thing.”

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