'Dead Peasant' Life Insurance, Corporate-Owned Insurance On Low-Level Employees For Profit; Recall?
'Do Corporations Routinely Buy ‘Dead Peasant’ Insurance?' Large companies supposedly take out 'dead peasant' life insurance policies on low-level employees, to be paid out as executive bonuses. Snopes, 2 May 2015. ~Aka 'Janitors Insurance'
(Snopes) In April 2002, the Wall Street Journal published an article titled “Companies Profit on Workers’ Deaths Through ‘Dead Peasants’ Insurance,” describing what was then a little-known practice wherein large companies purchased corporate-owned life insurance (or COLI) policies on low-level employees in order to garner tax breaks and profit from their deaths (even if those employees had long since ceased working for the companies that took out the policies).
That article addressed the more colorful name by which the practice had become more widely known in subsequent years, “dead peasant insurance,” and how it grew to become common after regulatory changes in the 1980s:
The practice is as widespread as it is little-known. Millions of current and former workers at hundreds of large companies are thus worth a great deal to their employers dead, as well as alive, yielding billions of dollars in tax breaks over the years, as well as a steady stream of tax-free death benefits. Nestle USA has policies covering 18,000 workers, Pitney Bowes Inc. has policies covering 23,000, and Procter & Gamble Co. has 15,000 covered workers, spokespeople for these companies confirm.
The coverage is called broad-based insurance, or corporate-owned life insurance, usually shortened to COLI. For years, companies could insure only key personnel deemed essential to the business. But a loosening of state rules in the 1980s allowed for an explosion in a new kind of COLI that covers rank-and-file workers — known in the insurance industry as janitors insurance or, in at least one instance, dead peasants insurance. “I want a summary sheet that has … the Dead Peasants in the third column,” one of Winn-Dixie Stores Inc.’s insurance consultants wrote in a 1996 memo. Winn-Dixie wouldn’t comment on the memo...
..While corporate-owned life insurance was once a reasonably common practice in big business, the Pension Protection Act of 2006 removed its primary function as a tax loophole. And although the proceeds of such policies previously paid out after the deaths of low-level employees on occasion funded executive salaries, their primary purpose was not to generate corporate profits based upon higher worker mortality rates. Increased scrutiny in the early 2000s (and corresponding litigation) led to the decreased use of dead peasant insurance policies after 2006.
'Capitalism, A Love Story' (2009) documentary scene about 'dead peasant insurance policies.'
Interest in dead peasant insurance policies was spurred by the release of Michael Moore’s 2009 film 'Capitalism: A Love Story.' That documentary featured interviews with the family of a woman who once worked as a cake decorator for Walmart and died of asthma complications while in her twenties. Her family maintained that they did not receive any portion of the insurance proceeds paid out to Walmart after her death:
That segment was one of the most powerful scenes in the film, and its details were among the most memorable. *However, Moore clarified that Walmart had long discontinued the practice of obtaining life insurance policies on rank and file employees years earlier following a larger lawsuit initiated by families of deceased employees insured by that giant retail chain...More, https://www.snopes.com/fact-check/dead-peasant-insurance/
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