Does your company have an life insurance policy on you... that your family will never see a cent from? That will pay hundreds of thousands of tax-free dollars, exceeding the salary of the covered employee many times over, usually on a low-paid worker. Even if the worker dies after they leave the insuring company. A large number of corporations have been getting payoffs and tax shelters from life insurance on their rank and file employees, to the tune of 9 billion dollars a year.
Apparently this is common and ongoing since insurance regulations were relaxed during the Reagan 80's, but I had not heard about this til today, from this video clip from Michael Moore's new movie, previewed on The Daily Beast:
Below is an excerpt from a MSN Money article, Does your boss want you dead? by Liz Weston. (The article has no date on it but seems to have been posted in late 2003 - six years ago! This has been going on for decades!). Apparently the IRS wants their taxes on the payoffs and has been cracking down since 2005. They pulled Wal Mart into court and several states have banned the practice altogether.
Labor leaders and some lawmakers have denounced the policies as unjust and repulsive. The companies say profits from the policies can help offset the increased cost of employee benefits and enhance the businesses bottom lines.
Corporate-owned life insurance actually comes in two flavors:
Executive or key person policies that insure the lives of top executives. This coverage has been around for decades and has a clear business purpose, since losing the expertise, knowledge and contacts of top managers can be financially devastating for companies.
Broad-based or janitors policies that insure rank-and-file workers. Here the purpose is basically profit. The life insurance proceeds are tax-free. The policies have an investment component that allows companies to earn tax-deferred returns while the employee is still alive. And, of course, companies can take out tax-free loans on the policies. All these gains and income are used to fund operations, pay for executive compensation or boost other benefits.
No one knows how many corporate-owned policies are issued on executives versus rank-and-file workers. Wal-Mart alone had taken out about 350,000 such policies between 1993 and 1996. Nestle USA had policies on 18,000 workers in 2002, The Wall Street Journal reported. Enron had $500 million in policies on workers.
Sales of the policies came to a virtual standstill in September 2003, according to the insurer trade group ACLI, when the Senate Finance Committee approved legislation that would have taxed payouts made to companies if the employee had left more than a year earlier. That indicates that most policies arent being sold to protect companies financially against the loss of key current employees.
Strong insurance industry protests led the powerful committee to reconsider its action. Further work on the issue has been postponed until 2004, and indications are that the senators are softening on the idea of greatly restricting the policies, said Jack Dolan, ACLI spokesman.
Did you know about this? The sheer cynicism of the names of the policies - dead peasant, dead janitor - just says it all. I don't know about you but this makes me nauseous.