"And people say I'M the bad guy."
Let’s play a game of “what-if.”
What if you devoted many hours of your precious time here on Earth working hard at a job to obtain a life of happiness and security for yourself and your family? Then, what if, for whatever reason, say you died?
Daunting, I know. None of us really like to think of our own death simply because, well, it seems so final, and, let’s face it -- in the end, it’s unavoidable. But I’m not trying to be unsettling. This is all going somewhere, so please, stay with me.
What if you died, and that corporation that you had worked all those hours spent scraping to make a living for yourself and your family, made a ridiculous profit off your now dead corpse? Since we're being hypothetical here, let's say that maybe a contributing cause of your death was job related stress, like a stroke or heart attack.
Halloween is around the corner, so forgive my indulgence in the macabre. Trust me though, there are much scarier things both in the present and looming on the horizon, and we all know it because we’re living it, right here and now. Michigan knows it better than most: record joblessness and home foreclosures, crippling personal debt, loss of industry, the collapse of the state economy. Michigan is so broke, in fact, they’re paroling what many prosecutors feel are dangerous felons out of the clink early in order to skim a few bucks off the state deficit.
Pretty scary stuff.
So, back to the what-ifs. What if that company, the one you devoted untold hours to, and is now cashing in off your death, then turned around and used the money they made off you to pay for their own personal retirement perks for top executives? What if you never even knew about the policy in the first place? What if, after all that, they returned the favor with a dehumanizing label, yet another undignified act to pile on the mountain of humiliation already suffered by the American workforce?
I wish I was making this up, but not even my overactive imagination has the skill and artistic range to drum up something like this. No, this is way out of my league. It takes a group of people who really, REALLY love money, to conjure this level of creativity, this epic amalgamation of death, gold, and greed.
Corporate Owned Life Insurance, or COLI, is somewhat similar to the standard brand of life insurance you might purchase to protect your family in the event of your death, except that, among other major differences, your family genuinely cares a great deal that you live to see another day, hopefully because they love you, but at the very least because your death, as a contributing breadwinner, would cause considerable financial hardship -- something known as "insurable interest" in insurance sales jargon. Proof of this affection could lie in the fact that your family would never refer to you as a "dead peasant" -- unless you were really disliked, perhaps. But that's exactly what the insurers for Winn Dixie did when the grocery store chain took out COLI on 30,000 of its employees several years back, without their knowledge or consent.
The brokerage firm prepared two memos in which the employees were referred to as "dead peasants," documents that later were introduced as court record when the government took on Winn-Dixie over the policies and won. The American tradition of bluntly calling things as we see it sort of won out, and the COLI has largely been referred to as "Dead Peasant" insurance ever since. It's also referred to as "janitor insurance" -- a major insult to hard-working janitors everywhere.
The way it works is like this: The company you work for decides to take out a life insurance policy on you with the outward claim that the event of your death would represent financial loss for them because, well, you can't work when you're dead. The premium on that policy goes into a cash account which, in turn, the insurer invests on your company's behalf. The investments which accrue into this account are tax-deferred, and many naysayers -- in particular, the Internal Revenue Service -- say such investments become a tax shelter of sorts for companies interested in putting their money somewhere secure where Uncle Sam can't touch it.
Despite its controversial nature and the ethical questions surrounding it, Dead Peasant insurance has experienced only a very limited scope of reform, however the IRS has managed to win several victories in the court system against companies who sue following a series of amendments in tax law. In 2006 the federal government passed regulation requiring companies to obtain written informed consent from employees before taking out a COLI policy on them.
Still, according to Houston attorney Mike Myers, there are loopholes in the system that still allow companies to circumvent notification -- either by ignorance of the law or through gaps in the system -- and corporations continue to profit off these investments.
"The only purpose this serves is a tax break for corporations," said Myers, who has been representing families against large corporations like Wal-Mart in cases involving dead peasant insurance since 1995. "If the government wants to give corporations a tax break, that's fine. I don't know why it has to be tied to the lives of employees in this form ... of a mass gimmick."
Myers may be a familiar face as he and some of the clients he represents were featured in Michael Moore's latest shock doc “Capitalism: A Love Story.”
Say what you will about the man and his politics, but Moore has the uncanny ability to shine the spotlight on issues that make the masses' stomachs churn and blood boil. Rep. Luis Gutierrez (D-Ill.) specifically mentioned the film in a Sept. 30 press release announcing his proposed legislation H.R 3669, labeled The Employer Owned Life Insurance Limitation Act.
This bill appears to represent the most bold attempt so far at reform, as it would completely prohibit companies from taking out COLI policies on its rank-and-file employees. The measure seeks to return COLI to the realm of its original intent, allowing such policies to be taken out only on those who make over $1 million per year -- often referred to as executive or key person policies -- giving the company 30 days to notify the employee of its intent to purchase. If that employee leaves the company to work elsewhere, his former workplace will have 30 days to cancel the policy.
Gutierrez believes such a measure will stop companies from taking out policies without employee knowledge and in turn maintaining them long after the employee has moved on to another company. Any business in violation of the law would be subject to fines and misdemeanors as well as a potential civil suit from the employee or the deceased employee's family.
“A company should benefit when it invests in the well being or education of its employees,” said Gutierrez. “A company should never benefit when it instead gambles on the demise of its employees. My bill is intended to reverse this fundamentally backwards set of priorities. This is about human capital.”
The bill has been referred to the Committee on Education and Labor, with Representatives George Miller (D-CA), Marcy Kaptur (D-OH), and Bob Filner (D-CA) adding their names as co-sponsors. Sylvia Warner, press secretary for Rep. Mike Rogers (R-Mi.) deferred comment as the proposed legislation has not yet been reviewed by Roger's office.
So what exactly are the level of gains experienced by today's beneficiaries of post-regulation COLI policy? It's difficult to say for certain, but according to a February 2009 article published in The National Law Journal, banks in particular have made significant cash gains off its employees on what are known as Bank Owned Life Insurance (BOLI) plans. The article cites information from two Texas law firms who are preparing to file suit against certain national banks on behalf of its low level employees for allegedly violating informed consent regulations. The firms claim nearly half of all U.S. banks are beneficiaries of BOLI plans on their employees with an estimated value of $120 billion. Expert sources go on to say that COLI policies still account for nearly 20 percent of life insurance policies written every year.
Corporate policy holders still hold steadfast to the claim that such policies are legitimate businesses practices, the financial benefits of which are often used to help defray the cost of employee benefits, or at least that's what Bank of America Corp. executivess said in an official statement published in the journal piece. I suppose the final verdict on that will be decided once Rep. Gutierrez's bill is given a fair hearing.
Meanwhile, Myers has created a detailed website complete with FAQ designed to educate people on the origins of Dead Peasant insurance, including information on how people can find out if their corporations have taken out policies on them, as well as an alphabetized list of every company known to be a beneficiary of a COLI policy.
Many of those corporations listed have business interests here in Livingston County, either through the sale of products or through investments: American Greetings, Ameritech, Avon, Panera Bread, the Coca-Cola Co., Clorox, Hershey Foods, and Proctor and Gamble, to name a few. Wal-Mart suffered such explosively bad press after being found with its hand in the Grim Reaper's cookie jar that the company no longer takes out COLI policies on its workers. The company at one time had policies on thousands of employees.
According to recent press reports, Wal-Mart has since filed a lawsuit against its own insurer, AIG Life Insurance, claiming the company didn't properly inform them of the risks, citing losses of more than $150 million. To me, this is sort of like betting on a horse race and then suing the bookie when your pick comes in last because he didn't properly inform you of the possibility that your horse might just lose the race. But the act of corporate scapegoating seems to be getting companies further and further ahead (government bailout, anyone?), and as long as there's no danger of anyone showing up to break your legs, why stop now?
Interestingly enough, when I browsed the list myself I came across the Eaton Corp., a company my father worked for as a photographer in the mid 1980s, a time before the notification requirements were in place. My father was laid off from the company several years ago, and I asked Myers if it would be possible for my father to find out whether or not any insurance was ever taken out on him, and whether or not the company would still be able to benefit from such a policy. His answer was pretty bleak: short of contacting the insurance holder that now contracted with Eaton and asking them, there was little way of actually finding out. Bummer. I think he would deserve to know something like that, to say nothing of the millions of other people who's imminent possibility of death has helped to make rich companies even more rich.
You can find this blog post at Livingstontalk.com