Missouri will become the first state later this summer to ban operations that state officials say can defraud thouands of retirees out of all or part of their pensions.
The effort will protect only retired government employees who are approached by pension advance operators. The bill passed by the Legislature this spring and signed by the governor goes into effect August 28th. State Treasurer Clint Zweifel, who made the issue his top legislative priority this year, says pension advances are dangerous and can be frauds.
“These schemes are currently unregulated in Missouri…and these agreements can be easily misrepresented to the borrower. Pension advances often include requirements to buy life insurance…Interest rates can often exceed 100percent,” he says.
The new law blocks pension advances by making it illegal for any participant in a state retirement to transfer or assign any part of that retirement plan to somebody else.
Zweifel says pension advances are dangerous: “You could put yourself in a serious position where, because of the upfront payment, you really reduce your retirement security for the long term,” he says.
The new law does not apply to pension plans in the private sector. But it’s a caution for non-government pensioners as well.