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Loans against the IA balance. There might be a compelling case
to allow the worker to borrow against his/her IA account. For workers
who have terminal illness, this is now done with life insurance
under so-called viatical arrangements.
Viatical arrangements have developed to allow terminally
ill persons -- such as AIDS or cancer patients -- to access proceeds
of their life insurance policies in advance of their death. Under
these arrangements, the terminally ill person signs over the proceeds
of his/her private life insurance in exchange for current income.
The viatical seller takes a portion of the life-insurance to cover
the cost of administration, of assuming the risk that the person
won't die as expected, and profit.
Should such arrangements be allowed for the IA portion of Social
Security? Would the government set rules under which they would
be allowed? For example, -- only if the ill worker were unmarried,
or only if the ill worker had a very high probability of dying?
Would the agency set up a loan program? Loans add significantly
to the administrative burden of retirement savings plans (Benna,
1997, Cavanaugh, 1996). More important, loans, like other forms
of early access, erode the retirement Security that the IA funds
were designed to provide to workers or their widowed spouse.
In summary, political pressure to grant access to or loans from
IA balances in the event of disability is likely to be significant.
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