By Arlie Calalo

THE Trade Union Congress of the Philippines denounced lawmakers yesterday for their failure to enact the proposed pre-need industry code, which is supposed to provide safety nets for plan-holders.

TUCP secretary-general Ernesto Herrera, expressed disappointment over the unwarranted delay in the passage of the code even as tens of thousands of salaried employees and migrant workers lost their investments in pre-need companies that went belly up.

A former senator, Herrera said the lawmakers have an obligation to protect plan-holders from failed pre-need firms, the latest of which was the Legacy Consolidated Plans, Inc. ?Pre-need plans represent the hopes and dreams of hundreds of thousands of Filipinos for the college education of their children, or for their financial security upon retirement. And legislators are duty-bound to safeguard these hopes and dreams,? Herrera said in a statement.

This is definitely worrisome ? that up to now plan-holders have absolutely no protection whatsoever once the provider that sold the plan collapses, as in the case of Legacy?s failure last month.?

The proposed pre-need code seeks to put in place a comprehensive regulatory framework to ensure the industry?s long-term stability and expansion, protect planholders and thwart abuses, including self-dealing by a provider?s trustee or officer.

The bill creates an insurance fund that will guarantee benefit payments in case a preneed firm goes bankrupt. Unlike bank deposits, pre-need plans are not covered by any insurance.

The proposed code also mandates providers to deposit in the trust fund up to 60 percent of the money collected from planholders. At present, they are required to put in the trust fund only 45 percent to 51 percent of collections.

Even before the collapse of Legacy and others before it, such as the College Assurance Plan Inc., Pacific Plans Inc. and their smaller rivals in 2004, the Securities and Exchange Commission had warned that the biggest threat faced by planholders was ?the risk of insolvency of their providers and their respective trust funds.?

Quoting the SEC report which was released as early as 2000, Herrera said that some pre-need companies have created a smokescreen of faulty financial reporting, which prevented regulators from detecting early their financial problems.

The SEC report also showed that 35 percent or 29 of the 83 pre-need firms registered between 1977 and 1999 had curtailed or closed shop.

Once the code is enacted, supervision and regulation of the industry will be transferred from the Insurance Commission to the SEC, in view of the latter?s greater actuarial expertise and competence.

Because of waning public confidence, pre-need industry sales have dropped gradually over the years to P18.9 billion in 2007 from P19.8 billion in 2006 and P20.5 billion in 2005, according to SEC.

In the 10 months to October 2008, industry sales fell another 20.8 percent to just P12.7 billion as against P16.05 billion in the same period in 2007.

In the 10-month period, education plan sales alone plunged 51.8 percent to P1.59-billion from P3.3 billion in the same period in 2007.