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Retirement Planning > Retirement Investing

Horace Mann Settles Over LTD Retirement Income Offset Confusion

By Staff Writer

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NU Online News Service, July 17, 11:15 a.m. – Horace Mann Educators Corp., Springfield, Ill., says it has agreed to settle a class-action suit brought by customers who claim they misunderstood an income offset provision in its long-term disability insurance policies.

Lawyers filed the suit in May 2000 in a Marshall, Texas, state court. The original plaintiffs were eight teachers who said they learned too late that a Horace Mann LTD policy provision permitted the company to deduct early retirement income from its LTD benefits obligations.

Because of the retirement income offset provision, the value of the policies to the teachers was far less than the teachers had believed, the suit alleges.

The teachers also accused Horace Mann of hurting policyholders in the 1980s and 1990s, by encouraging them to replace LTD policies without the income offset provision with policies that included the provision.

Horace Mann says in a statement announcing the settlement that income offset provisions are common in LTD policies, because many customers can count on Social Security, retirement income and other sources income to help them cope with a disability.

“We were troubled to hear that some of our customers misunderstood the nature of the product they purchased,” Louis Lower II, president of Horace Mann, says in the settlement statement. “We take pride in maintaining high ethical standards. Our commitment and responsibility to educators and their families is unmatched and we will continue to work hard to maintain the trust we’ve earned in this community.’”

If the state court approves the settlement, Horace Mann will provide additional benefits for current policyholders and other compensation for policyholders who can show that they misunderstood their policies, the company says.

The cost of the settlement, legal fees and administrative costs will be about $5 million, Horace Mann says.

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