Opinion ID: 1232987
Heading Depth: 1
Heading Rank: 3

Heading: Liberty and RDFA

Text: Early in the 1980s, Liberty entered into a number of contracts, called Reserve Deposit Fund Agreements (RDFA), [2] with trustees of various privately funded employee retirement plans whereby the trustees periodically deposited money with Liberty, the money ultimately to be used to fund retirement benefits to participating employees. For the first ten years of the contracts, Liberty guaranteed a minimum four percent interest rate, or such greater rate as determined by Liberty. The terms of the RDFA allowed the plan trustee to terminate the contract at any time and require Liberty to return the entire amount deposited, with accrued interest, to the retirement plan. Additionally, partial withdrawals were permitted for any of four purposes: (1) to purchase an annuity, from Liberty or any third party, for a retiring employee; (2) to purchase a paid-up life insurance policy for an employee; (3) to pay any benefit due a retiring employee under the retirement plan, e.g., a lump sum payment, an installment payment, or an annuity, at the option of the retiring employee; or, (4) if an employee terminated her employment prior to retiring, the trustee could recover the departing employee's non-vested interest in the retirement plan. These withdrawal options were guaranteed during the first ten years of the contract. Liberty subsequently sold the contracts to Investment Life Insurance Company of America (Investment). Investment, initially a South Carolina insurer, later redomesticated in North Carolina, while maintaining a license to sell insurance in South Carolina. In 1993 Investment was declared insolvent by the State of North Carolina. When Investment's assets were not sufficient to meet its obligations under the RDFA, a number of plan trustees applied to the Association for reimbursement. The Association denied coverage. This litigation ensued after Liberty paid the shortfall and accepted an assignment of the trustees' claims against the Association.