Dead Peasant Insurance - You're worth more to your company dead

[ElsewheresDaughter]

At least once a week I buy my lunch from Au Bon Pain. It never occurred to me that its employees are subject to what I consider a screaming unethical conduct.

In the year that just ended, the company that owns these food outlets, Panera, made $3 million by pocketing the death benefits after several of its employees died --- without giving their families a red penny.

And Panera is hardly the only American corporation that fattens its bottom line in this ghoulish manner. Take CM Holdings Inc. When one of its employees, Felipe M. Tillman, died, the company received life insurance benefits amounting to $339,302; his family received a big, fat nothing.

The Wall Street Journal, which reported Tillman's fate, found that numerous corporations purchase corporate-owned life insurance (COLI) policies on millions of employees, typically without their knowledge.

Among the corporations that have bought such insurance, nicknamed "janitors' " or "dead peasants' " insurance, are AT&T, Dow Chemical, Nestle USA, Procter & Gamble, Walt Disney and Wal-Mart.

Corporations gain not merely from the tax-free life insurance benefits they receive when current or former employees die but also can borrow money against these policies. Many companies even deducted the interest on these loans from their taxes.

In 1996 Congress moved to limit such deductions, and the IRS has sued some 80 corporations, including Winn-Dixie and American Electric Power, to collect back taxes on such loans.

Still, companies benefit. They are not taxed on gains within a life insurance policy; in effect, these policies amount to tax-free investments for businesses.

Critics have compared these life insurance policies to those purchased by some American slaveholders on the lives of their slaves, who also were unaware of such policies held by their owners.

The business of selling COLI policies is thriving, with premiums growing from $1.5 billion in 2000 to $2.8 billion in 2001. Insurance executives maintain that such policies are "perfectly legal."

Facing congressional curbs, the insurance lobby has placed ads in Capitol Hill newspapers extolling the importance of COLI, calling it "business life insurance" on the grounds that such coverage is essential for the well-being of the corporations involved.

Herb Perone of the American Council of Life Insurers told the San Francisco Chronicle: "Nobody gets upset when a company insures its plant or its fleet of cars or land or any other business asset. To think that your labor force is not a business asset is extremely shortsighted."

Mark Elam, the acting president of the American Council of Life Insurers, wrote to The Wall Street Journal that corporations use the benefits they gain from the employee's death to help finance health care for retirees. He cited no evidence to this effect.

In fact, in the case of Felipe Tillman, as well as many others, The Wall Street Journal reports that death benefits were used to fatten executive compensation.

In response, U.S. Rep. Gene Green (D-Texas) introduced a bill that merely called for notifying employees when companies purchase COLI policies on them, and not for changing this obnoxious practice. But he was not even able to get a hearing on his bill in the House.

Whether you call it dead peasants' insurance or use the less stigmatizing term COLI, the ghoulish practice would make a fine case study for the budding ethics programs that are being rushed into the curriculum of business schools since Enron.

Even Scrooge would have second thoughts about fattening corporate coffers and executives' benefits while widows and orphans are left to fend without a dime, even for funeral costs.

Amitai Etzioni is a professor at George Washington University and author of "The Moral Dimension: Toward a New Economics.
http://www.gwu.edu/~ccps/etzioni/B413.html


What is “Dead Peasant” Insurance?

Dead Peasant Insurance is sometimes used as a shorthand reference for life insurance policies that insure a company’s rank-and-file employees and name the company as the beneficiary. This means that the company receives the life insurance benefits when the covered employees die.(Even if that employee no longer works for the company) This insurance may also be called “janitor insurance,”…

How did it get the name “Dead Peasant” insurance?

Winn Dixie Stores bought life insurance policies on approximately 36,000 of its employees, without their knowledge or consent, and named itself as the policies’ beneficiary. The insurance brokerage firm that placed the policies prepared two memos describing the deceased employees as “Dead Peasants.” These memos were part of the court’s record in a lawsuit in which the United States Court of Appeals for the Eleventh Circuit held that Winn-Dixie’s policies were a sham transaction for federal income tax purposes. The memos were later used by reporters such as Ellen Schultz and Theo Francis of the Wall Street Journal and L.M. Sixel of the Houston Chronicle and incorporated into articles about this type of insurance.

How does a person know if he or she is covered by a policy?

It is often difficult for a person to learn whether he or she was covered by a “Dead Peasant” policy. These insurance programs became popular during the mid-1980s and have been an available investment opportunity for large companies since that time. Prior to 2006, however, there was no federal law that required employers to disclose the policies to insured employees. Any disclosure requirements that existed before 2006 were only through state laws, which were ignored in many instances. So, the only way a person could learn about the policies was through the employer’s voluntarily disclosure.

Which employers bought policies on the lives of employees?

Because a company’s purchase of insurance policies is not a public record, it is virtually impossible to know every company that invested in policies on employees’ lives. The following companies, however, are believed to have been named as the beneficiary of life insurance policies on employees:

* ADAC Laboratories
* Advanced Telecommunication Corp.
* Aeroquip Vickers Inc.
* Alabama Power Co.
* Alfa Corp.
* Allegheny Technologies Inc.
* Allergan Inc.
* Allfirst Financial Inc.
* Amegy Bank, N.A.
* American Business Products, Inc.
* American Electric Power
* American Express Co.
* American Greetings Corp.
* American Management Systems Inc.
* American Seafoods Group LLC
* Ameritech Corp.
* Amerus Group Co.
* Anadarko Petroleum Corporation
* Appalachian Power Co.
* Arch Chemical
* Aristech Chemical Corp.
* AT&T Communications
* Atlantic Richfield Co.
* Avery Dennison Corp
* Avon Products Inc.
* B. F. Goodrich Company
* Ball Corporation
* Bank Boston
* Bank Of America
* Bank One Corp.
* Barnett Banks Inc.
* Bassett Furniture Industries Inc.
* Be Aerospace Inc.
* Bear Stearns Companies
* Bellsouth Corporation
* Boise Cascade Corp.
* Boston Company
* Boston Federal
* Bristol-Myers Squibb Company
* Camelot Music, Inc.
* Carolina Power & Light Co.
* Carpenter Technology Corp.
* Catskill Financial Corp.
* Central Power & Light Co.
* Ch2m Hill Companies Ltd.
* Charming Shoppes, Inc.
* Checkfree Corp.
* Chemical Banking Corporation
* Citibank, N.A.
* Citizens Bank
* Clark Inc.
* Clorox Company
* CNF Inc.
* Coca-Cola Company
* Columbus Southern Power Co.
* Commercial Intertech Corp.
* Compass Bank (Florida & Alabama)
* Computer Technology Associates Inc.
* Consolidated Natural Gas Co.
* Consolidated Rail Corporation
* Cox Enterprises, Inc.
* CTA Inc.
* Cymer Inc.
* Diamond Shamrock Inc.
* Diebold Inc.
* Dime Bancorp Inc.
* Dow Chemical
* Earle M. Jorgensen Co.
* Eastman Kodak Company
* Eaton Corp.
* ECC Capital Corp.
* Enserch Corp.
* F&M Bancorp
* FiberMark Inc.
* Figgie International Inc.
* Fina Oil & Chemical Company
* First Bank System Inc.
* First Commonwealth
* First Midwest Bancorp Inc.
* Fleet Bank
* FleetBoston Financial Corp.
* Flightsafety International Inc.
* Frontier Bank
* Fulton Financial Corp.
* GATX Corporation
* Georgia Power Co.
* GNC Corp.
* Great Plains Energy Inc.
* GTE Corporation
* Gulf Power Co.
* HCR Manor Care Inc
* Hechinger Company
* Heritage Commerce Corp.
* Herman Miller Inc.
* Hershey Foods Corporation
* Hillenbrand Industries, Inc.
* Hosiery Corporation of America
* Houghton Mifflin
* Household Finance
* Hovnanian Enterprises Inc.
* Hughes Supply Inc
* ICI Americas, Inc.
* Idaho Power Company
* IKON Office Solutions Inc.
* Indiana Michigan Power Co.
* Integra Bank Corp.
* Intermark Inc.
* Iowa First Bancshares Corp.
* Iroquois Bancorp Inc.
* J Jill Group Inc.
* JP Morgan Chase & Co.
* Kansas City Power & Light
* Kansas Gas & Electric Co.
* Keithley Instruments Inc.
* Kentucky Power Co.
* Keycorp Ohio
* Kimberly Clark
* Korn Ferry International
* Laser Master Int’l. Inc.
* Linens N Things Inc.
* LKQ Corp.
* Louisiana Pacific Corp.
* Manor Care Inc.
* Marriott International Inc.
* McDonnell Douglas Corp.
* Media General Inc.
* Medicalcontrol Inc.
* Menasha Corporation
* MidAmerican Energy Co.
* Miix Group Inc.
* Mississippi Power Co.
* MNC Financial Inc.
* Mueller Industries Inc.
* National City Corporation
* NationsBank
* Nestle Enterprises
* Norfolk Southern Corp.
* Norfolk Southern Railway Co.
* Northern States Power Co.
* Ohio Power Co.
* Old National
* Olin Corporation
* Owens & Minor Inc.
* PacifiCorp
* Panera Bread Co.
* Panhandle Eastern Pipe Line Company
* Parker Hannifin Corp.
* Penn Treaty American Corp.
* Penns Woods Bancorp Inc.
* Phibro Animal Health Corp.
* Philipp Brothers Chemicals Inc.
* Phoenix Companies Inc.
* Pinnacle Financial Services Inc.
* Portland General Electric
* Potlatch Corporation
* PPG Industries
* Procter & Gamble Company
* PSS World Medical Inc.
* Public Service Co. of New Mexico
* Public Service Co. of Oklahoma
* Public Service Enterprise Group
* Questech Inc.
* R. R. Donnelley & Sons Company
* Ruddick Corp.
* Ryder System Inc.
* Sallie Mae (Stud Ln Mktg Assoc.)
* Savannah Electric & Power Co.
* Sequa Corp.
* Service Merchandise Co., Inc.
* Shearson Mortgage
* Sherwin-Williams
* Sky Chefs
* Smart & Final Inc.
* Smith Barney
* Sonoco Products Co.
* Southwest Bank
* Southwest Water Co.
* Southwestern Bell Corp.
* Southwestern Electric Power Co.
* Southwestern Public Service Co.
* Star Banc Corp.
* Stauffer Management Company
* Steelcase Inc.
* Sturgis Bancorp Inc.
* Summit Bank of N.J.
* Swank, Inc.
* Tellabs Inc.
* Tenet Healthcare Corp.
* Texas Eastern Transmission Corp.
* Tompkins Trustco Inc.
* TXU Corp.
* TYCO International
* UniFirst Corp.
* Union Bank
* United National Bancorp
* Urocor Inc.
* Vineyard National Bancorp
* W. R. Grace & Company
* Wachovia Corporation
* Walgreen Company
* Wal-Mart Stores
* Walt Disney
* Wang’s International, Inc.
* Wells Fargo, N.A.
* West Coast Bancorp
* West Texas Utilities Co.
* Westar Energy Inc.
* Western Aire Chef Inc
* Western Resources, Inc.
* Westpoint Pepperell
* Winn Dixie
* Winnebago Industries Inc.
* Woolworth Corporation
* Xcel Energy Inc.
* York Water Co.
* Zale Corp.

[Lifelong Protester]

1. my god, the greed just never ends, does it?

I'm too wearied by all of the other shenanigans of corporations to even be surprised, I guess.

Thanks for posting this.

[ElsewheresDaughter]

2. why would somebody unrecommended this?...wierd

[wroberts189]

11. If they worked for the people who did it. nt

[PBS Poll-435]

16. I unrec'd this thread because it just doesn't hold water.

The IRC is very specific about taxes, tax deductability, and tax deferrals regarding life insurance.

I had about 30 secs of "OMG! You Killed Kenny!" until I realized that it was complete crap.

[ElsewheresDaughter]

31. You don't know WTF tou are talking about^^^.....there is tons of proof this is happenning....

MSN Money
http://moneycentral.msn.com/content/Insurance/P64954.asp

Dead peasants' insurance pays your employer a secret, tax-free windfall when you die. Insurers have sold millions of policies to companies such as Dow Chemical.

By Liz Pulliam Weston

Right now, your company could have a life insurance policy on you that you know nothing about. When you die -- perhaps years after you leave your employer -- the tax-free proceeds from this policy wouldnt go to your family. The money would go to the company.

Whats more, the company might use this policy to pay for retirement benefits and other perks not for you or your fellow workers, but for your companys top executives.

Sound outrageous? Such corporate-owned life insurance is also big business:

* Companies pay a whopping $8 billion in premiums each year for such coverage, according to the American Council of Life Insurers, a trade group.
* The policies make up more than 20% of the all the life insurance sold each year.
* Companies expect to reap more than $9 billion in tax breaks from these policies over the next five years. The policies are treated as whole life policies. So, companies can borrow against the policies (though the IRS won't let them write off the interest). And the death benefits are tax-free.

Hundreds of companies -- including Dow Chemical, Procter & Gamble, Wal-Mart, Walt Disney and Winn-Dixie -- have purchased this insurance on more than 6 million rank-and-file workers.


These policies, nicknamed dead janitors or dead peasants insurance, soared in popularity after many states cleared the way for them in the 1980s. Congress recently tried to crack down on the practice, to the howls of the insurance industry -- which earlier this year managed to derail reforms.

[vadawg]

55. i guess if the company pays the premiums then they are entitled to the cash

i got no problem with this unless the company is actually killing off the employee to help their figures,

[northernlights]

59. well it certainly motivates them to do so

Seriously, I'm wondering if the company where I just started working is doing that. At training, they shove bags and bags of candy bars in front of us every night. To the point where we started asking them if they were trying to make us toothless and diabetic. I've gained several pounds in just a couple weeks. The woman next to me said her teeth now hurt all the time.

Last night we put our foot down and said take the bags away. Someone dropped on in right in front of me a few minutes later, and I shoved it along. If they keep it up, I will probably simply take it to the trash and dump it.

[namahage]

56. You might not want to cite a 2004 article when the law was changed in 2006.

It is NOT a "secret, tax-free windfall" as long as the policy was issued after August of 2006.

IRC Section 101(j) disallows exclusion of life insurance proceeds from gross income, subject to certain exceptions. The exceptions are for directors or other "highly compensated" individuals, employees who were working for the company at some point in the year before death, or if the money was to be given to the heirs.

And in all cases, there are notice and consent requirements, where there must be notice from the employer and consent in writing from the covered employee indicating that not only does (s)he know about the policy but also the maximum amount, the fact that it may be in force after termination of employment, and that the policyholder (the company) gets the proceeds.

Of course, this doesn't apply to life insurance policies bought before August 2006 (they are considered to be grandfathered in, and 101(j) doesn't apply).

[wolfgangmo]

44. You can lead someone to water...

... but it takes no effort at all to get the idiots to drown themselves. They will hold themselves under water.

[ShortnFiery]

3. Corporate Ghouls. eom

[PBS Poll-435]

20. ...

[PoiBoy]

4. Excellent post...

thank you for the information...

:hi:

[flamingdem]

5. This is some sick crap, I'd go crazy on them if I found out they did that to me nt

[PBS Poll-435]

21. .

[ElsewheresDaughter]

34. They don't have to tell you...nor anyone...WSJ article here....

http://online.wsj.com/public/resources/documents/may_2.htm

ome of America's biggest banks -- including Bank of America Corp., J.P. Morgan Chase & Co., and Bank One Corp. -- hold billions of dollars in so-called janitors insurance on their present and former employees. But investors may have a hard time finding much information in their Securities and Exchange Commission filings.

Like many large employers, banks for years have taken out life insurance on the lives of large groups of their workers at all levels, with the banks as the beneficiaries, sometimes without informing their employees. The insurance can give a nice boost to bottom-line profits because it provides tax breaks. Income earned on money in the policies is tax-free for the employer, and when the workers and former workers die, the cash payments the company receives at their deaths are tax-free.

PROFITING WHEN EMPLOYEES DIE
• Banks Use 'Janitors' Insurance
To Get a Boost in Their Profits
04/26/02

• Case Shows How 'Janitors Insurance'
Works to Boost Employers' Earnings
04/25/02

• 'Janitors Insurance' Issue Leaves
Workers in the Dark on Coverage
04/24/02

• Companies Profit on Workers' Deaths
Through 'Dead Peasants' Insurance
04/19/02




Bank of America, for example, purchased an undisclosed amount of coverage in 1995, 1996, 1998 and 2000, according to documents given to its workers, and the policies continue in effect even after employees have quit, retired or been laid off. But there is no mention of the insurance policies in the company filings. Shirley Norton, a spokeswoman for Bank of America, says the firm doesn't disclose any details of the insurance because "we're not required to."

J.P. Morgan Chase has a brief statement in its filings, noting that it uses company-owned life insurance to finance employee benefits -- but not how much it holds or how much income it generates. "That's just company policy," spokesman Tom Johnson says. He adds that the policies are on "management-level" employees and retirees.

Wachovia Corp. refers to its insurance policy only once in its latest federal filings, in a table reconciling tax figures. A spokeswoman says the policy covers about 25% of Wachovia's employees, whom it considers officers of the company. The policy contributes about 3% of the bank's operating earnings, the spokeswoman says.

Mellon Financial Corp. discloses that it held $1.5 billion in life-insurance assets that benefit the company at the end of 2001, but includes no other details. A spokesman says the policies cover some 600 of the company's "most senior people." He adds that Mellon's filings don't include more details, because the impact of the bank-owned life insurance, or BOLI, on net income is small enough that it isn't material. Materiality often is defined as the information an investor needs to know to make informed decisions about investing.

Insurance experts say many more banks hold this kind of insurance than the slightly more than 100 banks that made such disclosures, as determined by a search of SEC filings.

[LooseWilly]

6. If that list is accurate, I'd lay even odds that one of those companies profited off my mom's death.

Goes to show she was right when she said "Just because you're paranoid, doesn't mean they're not out to get you"...

[PBS Poll-435]

7. Re read the article

Horseshit

Complete horseshit.



Nobody (Not even a scary bank or utility) received a death benefit of 339K without the individual whose life was insured having the taxable premiums withheld from paychecks or a nasty 1099/W-2 surprise at the end of the tax year.

[LooseWilly]

8. No, I treat them well so they'll last longer.

An admittedly UnAmerican rejection of disposability, I suppose...


** Response to a completely changed in-Edit post, which originally asked "Do you insure your assets?"... which now says something completely different **

[PBS Poll-435]

13. The bottom line is that this smells of BS. Any life insurance policy regardless of the beneficiary

Is taxable to you as income.

If it were a group life policy >$50,000 then it would show up on your W-2.



If it were an alternative policy (UWL or something that is not in the usual works of HR,) then you would receive a 1099 at then end of every tax year (assuming the value of the premium is in excess of $600.00 per anum.) And if the premiums were not in excess of $600.00 per year YOU ARE STILL REQUIRED to report the policy premiums as taxable income. And if all of these crazy companies took policies on you, with or without your knowledge, it is still a taxable (document-able) benefit to you. (And YOU would have the privilege of changing the beneficiary any fucking time you wanted to.)

[LooseWilly]

17. It sounds odd... I don't know that it sounds like BS.

When my mom died her life insurance payout was not taxable. Not as income, not with a 1099 as some sort of interest or dividend income. No taxes were taken out.

(And yes, she worked for one of the companies listed above until the day she dropped dead, overwork and stress probably contributing factors to her heart attack.)

If a life insurance plan is somehow considered "income" in the sense of some sort of investment, which is the only other way I can interpret your position, then it would be an investment by the party who took out the plan & who pays the premiums... and that would not, in this case, be the person insured (which seems counter-intuitive in the case of a life insurance plan if it is assumed that one only takes such a plan out on themselves... but if others do... why wouldn't it be they who are the "investors" in the plan?).

If you are not paying for the insurance, and you are not the beneficiary... why would it be taxable to you? Why would it be a documentable asset for you? It seems to me that you are assuming a greater degree of one's control over possible ways to profit off oneself than a creative insurance salesman would be required to respect.

If the company creates the insurance plan, is the beneficiary, and pays all the costs... then they are the one's, in a legal sense, who have the "asset" and the eventual "income" deriving from the plan. And, as I said above, life insurance proceeds are not taxable income (and even if they were... it would be income accrued to the entity that receives the funds... not the deceased).

Odd, counter intuitive... yes. BS, on the other hand, sounds like wishful thinking to me.

[PBS Poll-435]

19. .

[LooseWilly]

25. Ok, I've never actually purchased, or had purchased for me, life insurance.

But... the idea that your employer has to charge you a portion of the taxes for an insurance premium that they mean to collect on themselves seems ridiculous to me.

Corporations pass taxes on to employees because they can. I am not certain, but I believe they could choose to pay the entire 15.3% Social Security tax for their employees, if they wanted to... but because they are only required to pay half of that, they pass the other half on to the employee.

In the case of the argument that anyone with a life insurance plan in their name is responsible for taxes on said life insurance plan, no matter who the beneficiary is... I can't help but think that... unless you can find a link that shows that no other entity is able to pay those taxes on the policy except the individual insured... there is every chance that the companies would view those taxes as merely a piece of the whole investment picture... and pay rather than deal with the chance that an employee might try to change the beneficiary.

I agree the whole thing seems strange... but no stranger than packaged derivative trading, let alone insuring.

Please... provide some substantiation that no one except the individual insured can pay the taxes... and I'll become doubtful as well... in the meantime, I find this new macabre tactic to fit synergistically with the "do more with less" notions that lead corporations to relentlessly downsize and then insist that the remaining employees work harder, harder, and harder still if they don't want to be downsized in the next round...

[olegramps]

37. You are dead wrong. Period.

[wolfgangmo]

47. YOu are absolutely correct EXCEPT

that you aren't in this case.

IF THE EMPLOYEE also owned the policy, then you would be correct, but because the company is both owner and beneficiary, then you are incorrect. The tax implications go with ownership of the policy, not the covered individual.

[wroberts189]

12. Outside of basic house and car NO.. I simply do not have the money they have. nt

[ElsewheresDaughter]

32. These policies yield tax-free income as their cash value increases. Corporations can borrow against

This insurance is also known as corporate-owned Life Insurance or COLI<2>.



Prior to the 1980s, insuring lower level employees by corporations was not allowed; <3> there was no “insurable interest”<4> in the employees’ survival. Companies could not argue there would be financial hardship if file clerks, janitors or nonessential managerial personnel perished. The rules for insurability<5> were designed to prevent life insurance from providing an incentive or avenue to profit from ones death. Insurance companies aggressively lobbied state insurance departments to modify the rules. The net effect allowed insurance companies to sell janitor insurance; without regulations or guidelines.



The rules in most states are unclear whether employers are obligated to inform workers if they are covered by COLI. Insurance codes in most states provide little help, if any, to an employee in discovering out whether a company has insured them, or the amount of the death benefit. Nor can family members ascertain if a current or past employer collected, or if they will collect. “ In Georgia, in fact, employers can even collect death benefit on the children and spouses of their employees. When asked about the law, the state’s insurance regulators said employers and insurers don’t report the details of COLI transactions to the state; (Schultz, Francis WSJ, April 24, 2002).”



Why do corporations buy janitor insurance? These policies yield tax-free income as their cash value increases. Corporations can borrow against these policies to raise cash. Money from these policies may be used for any purpose. Until 1996 the biggest advantage was the tax deduction received on the interest they were paying.<6> These loans were often at lower interest rates than money that could be borrowed from banks. Even without these deductions, corporations would benefit from tax-free gains and the death benefit collected.<7>



The IRS has the ability to find out about the COLI policies. The rules for disclosure are vague, thus making it hard to determine the amount of money spent on insurance. Corporations also use other types of COLI insurance to pay for executive benefits. The rules for disclosure don’t require companies to distinguish if the insurance is ‘COLI Executive’ or ‘Janitor COLI’; thereby, companies report their life insurance in aggregate. Accounting standards only require companies to report cash value as an aggregate number and only if the increase is significant.



If Congress asked their economists to determine the cost to tax payers, they would have a hard time determining a dollar value. Companies borrow against the cash value on the policies and do not report it as income; therefore, it is not taxable.

[liberalhistorian]

42. That is totally wrong. You are thinking of

when employees have their own life insurance with their company, in THEIR name, that lists their families as beneficiaries, in which the employee decides how much company-sponsored coverage they want and how much is to be deducted from their paychecks to pay for it. That is COMPLETELY separate from the specific kind of "life" insurance, COLI, we're talking about here, taken out and paid for by the COMPANY, NOT the employee; this insurance first began to be introduced about thirty or so years ago, and insurance companies designed it specifically for that purpose. The employee doesn't pay, the company does, it isn't taken out of any paychecks, often the employee doesn't even know about it. Wal-Mart's been really big on this for at least ten years; in fact, there was a case a few years ago where the family of one such deceased employee sued to get some of that money since they were left destitute by the employee's death.

I suppose the Wall Street Journal, the American life insurance association, numerous insurance associations, etc. ALL are wrong and YOU are the one who's right? Yeah, right. I think you need to brush up on your reading comprehension a bit, ya think?

[wolfgangmo]

45. Wow - you really have no clue about this do you?

Insurance has a few components; beneficiary, owner, and covered item or individual. Beneficiary is self explanitory - it's who get the money and covered person is who the policy covers. The owner is either the covered person or it can, in this case, be a 3rd party (think of a parent having a policy that they pay for that covers their spouse - the parent owns the policy and is the beneficiary).

In the case of dead peasant insurance, the owner of the policy is the company and the beneficiary is the company. In your mind you are mixing these 2 up. The owner is the one with the tax benefit or deficit. Only the beneficiary is tax free. Given that the employee does not pay the premium, nor get the benefit, then they have no liability nor say in the policy.

This is quite normal with many types of insurance and it is easy to mistake where the tax implications are unless you think it through.

Next time, rather than just saying "bullshit" when you don't understand, perhaps you should consider asking a question or calling for clarification. Waddaya say?

[wroberts189]

9. Excellent post. they are using their insane profits to gamble on our lives as an investment knr

[wroberts189]

10. Its unbelievable this is legal.

How do they take out these policies without the person getting a physical, showing their medical records, or even knowing?


I tried to get it once (on myself in case I died to help my wife) and Allstate drilled into our medical records so deep we got angry and said forget it.

[PBS Poll-435]

14. Doubt that it is.

Premiums are taxable in a group-life (collective employees) setting when the benefits exceed 50K. Anything after that is regarded as taxable income to the individual, not the beneficiary.

[LooseWilly]

22. That makes no sense.

By "premiums" I can't help but think you mean the monthly payments on the insurance. But it would only be taxable to the individual if it was a payment toward something that could be considered "payment" or an "asset" to that individual... which presupposes that the individual insured is in fact the beneficiary... or some relative of theirs.

If the company itself is the beneficiary, then the company would be responsible for the taxable premiums, because they are the ones with the "asset". If there is no form of payment to the individual, then it is not income, and therefore not taxable. To try to insist otherwise is akin to insisting that the employee be taxed based on the income that their work generates for the company that employs them, rather than the income that is distributed to the employee for their services.

That is a ridiculous line of argument.

That's like saying that a mechanic who works in a auto shop which charges $100/hr for labor ($18/hr of which, for example, might actually go to the mechanic)... is responsible for taxes on the $100/hr of labor.

This is not a case of it being income, of any sort, for the employee... and as such it would be ludicrous to insist that the employee would be taxed based on the projected future disbursements... because there are no projected future disbursements.

[PBS Poll-435]

23. .

[LooseWilly]

26. I hear what you're saying...

... but it sounds like you're stuck within the frame of life insurance as a "benefit" for the employee... and the frame of "rules" that that entails.

This is a whole different pancake.

Provide me with some documentation that says that a company is not legally allowed to pay those tax costs for a policy, and then you'll win me over. In the meantime, I think you are stuck in the "box" of benefits regulations... which would obviously lead to corporations shifting costs to beneficiaries wherever they can justify doing so.

[PBS Poll-435]

27. .

[ElsewheresDaughter]

33. PBS Poll 435 , .....These policies yield tax-free income as their cash value increases......

Corporations and banks benefit from these insurance policies in many ways:

1) The money collected from death benefits is tax-free.

2) They are not required to tell how the money is used once the death benefit is collected.

3) Polices yield a tax-free investment as the value rises.

4) Before 1996, companies could barrow against these policies and the interest was tax deductible.

5) The future death benefit is an attractive off-balance sheet asset.

Is it ethical for corporations to have COLI or BOLI on their employees? The ethics in this issue are very clear. Only companies possessing these policies benefit from this practice. Companies are not required to disclose any information about this type of insurance. COLI and BOLI insurance has been in a shroud of secrecy until recent articles appeared on this practice. A recent non-scientific survey in the Wall Street Journal asked if employers should be allowed to buy insurance with out the employee’s knowledge? Answer 202-Yes, 600-No. This clearly shows that the differences in opinions will remain until new federal and state guidelines are adopted.


U.S. News & World Report, 5/6/2002, Vol. 132 Issue 15, p32, 2/3p, 1c



April 27, 2002 <http://discusions.wsj.com/n/mb/message.asp?


Francis, Theo, and Ellen E. Schultz. “Case Shows How ‘Janitors Insurance’ Boost

Employers’ Earning”. The Wall Street Journal, April 25, 2002. http://online.wsj.com/public/resources/documents/april_25.htm



Francis, Theo, and Ellen E. Schultz. “Banks Use ‘Janitor’ Insurance To Get Boost

In Their Profits”, The Wall Street Journal, April 26, 2002.


Francis, Theo, and Ellen E. Schultz. “Large Banks Quietly Pile Up ‘Janitors’

Insurance Policies”, The Wall Street Journal, May 2, 2002.



Schultz, Ellen E., and Theo Francis. “ ‘Companies Profit on Workers Deaths Through

‘Dead Peasants’ Insurance”’, The Wall Street Journal, April 19, 2002. http://online.wsj.com/public/resources/documents/april_19.htm



Schultz, Ellen E., and Theo Francis. “ ‘Janitors Insurance’ Issue Leaves Workers in

the Dark on Coverage”, The Wall Street Journal, April 24, 2002.



Schultz, Ellen E., and Theo Francis. “Senator to Target Tax Boon To Firms Workers”,

The Wall Street Journal, May 3, 2002.www.independent.org/pdf/tir/tir_08_3_etc.pdf

[Selena Harris]

58. AIG sold WalMart dead peasant policies

AGR Online/ National NewsCivil rights attorneys sued Attorney General John Ashcroft and other US .... in the insurance industry as “dead peasant” and “dead janitor” policies. ... Wal-Mart took out about 350000 life insurance policies — payable to the ... Hartford Life Insurance Co. and AIG Life Insurance Co. sold the policies to Wal-Mart. ...
www.theglobalreport.org/issues/171/nationalnews.html - Cached - Similar


COMMENTFile Format: PDF/Adobe Acrobat - View
employees of various corporations have sued for the right to ... such as Wal-Mart that have purchased these dead peasant policies. ..... conduct” by AIG, and the claim appeared to be primarily against Wal-Mart. Mayo, 220 F. ...... Francis, Janitors Policies' Tax Advantages May Be Eased—Measures in House, Senate ...
www.houstonlawreview.org/archive/downloads/41-1.../Rushg1.pdf - Similar

[blueworld]

38. We aren't insured as individuals but rather business "assets"

Under the tax code, our life insurance benefits are taxable income to us because the employer pays on OUR behalf & WE get to name the beneficiaries. This isn't the case with Dead Peasant's Insurance. The practice was "reformed" by Congress in 2006 so they can't collect on an employee who hasn't worked for them in over a year - read the rest of the articles.

Although Oregon has a law requiring employee consent, most other states don't & two of the worst offenders are New Jersey and Virginia - my homes for all my working life.

Oh, PS: my father the Fire Captain couldn't even PURCHASE life insurance to protect his family because of his high-risk job until his union provided a group plan (FBA).

Do some more homework, please.

[liberalhistorian]

43. Once again, it is NOT the typical life insurance policy

you're thinking of. It is a specifically corporate policy, with different tax rules applied, that were designed for corporations.

[wolfgangmo]

48. Again, in the case of life insurance..

It is not the individual but the owner of the policy that has tax implications.

Sometimes the owner and the covered individual are the same, but if not then the taxes follow the ownership.

I hope that helps.

[thelordofhell]

15. If a person or company took a life insurance policy out against another person

that other person should be notified of such a policy.

[namahage]

24. And indeed, if they want the proceeds to be excluded from income (IOW, tax-free)

they have to meet "notice and consent" requirements under IRC 101(j)(4).

(4) Notice and consent requirements
The notice and consent requirements of this paragraph are met if, before the issuance of the contract, the employee—
(A) is notified in writing that the applicable policyholder intends to insure the employee’s life and the maximum face amount for which the employee could be insured at the time the contract was issued,
(B) provides written consent to being insured under the contract and that such coverage may continue after the insured terminates employment, and
(C) is informed in writing that an applicable policyholder will be a beneficiary of any proceeds payable upon the death of the employee.

If these aren't met, then 101(j)(1) applies, and the employer can only write off what was paid in:

(1) General rule
In the case of an employer-owned life insurance contract, the amount excluded from gross income of an applicable policyholder by reason of paragraph (1) of subsection (a) (referring to proceeds from life insurance being excluded from income, and thus not taxed) shall not exceed an amount equal to the sum of the premiums and other amounts paid by the policyholder for the contract.

[PBS Poll-435]

18. delete

.

[ipaint]

28. 'Secret' life insurance triggers suits

"Banks, meanwhile, are next on the list of dead-peasant lawsuit targets. Two law firms in Texas say they are on the brink of announcing lawsuits against major players in the banking industry accused of taking out life insurance policies on low-level employees, such as tellers, without consent or, in some cases, informed consent. The firms claim that nearly half of all U.S. banks have reported owning bank-owned life insurance (BOLI) policies on employees, at an estimated value of $120 billion.

It appears that there are a substantial number of policies on employees that are still being written and purchased by the national banks. And the amount of insurance on each individual bank employee is staggering. We may be talking about seven figures," said Mike Myers, a partner at Houston's McClanahan Myers Espey, who is planning to file dead-peasant lawsuits against some major banks in the coming weeks. "I think the banks have become savvy enough for litigation purposes that they're going to have a sheet of paper to wave around that has the word consent on it, but whether it's an informed consent . . . I don't know."

Myers, who has settled dead-peasant class actions against Wal-Mart and Fina Oil and Chemical Co. in recent years, claimed that, while many banks are getting employee consent for life insurance policies, they're leaving out a crucial detail: how much money the policy is worth.


"That's the part that makes people say, 'Wait a minute. What are you talking about here?' " Myers said."

Many banks were contacted for this story, but nearly all declined comment, including JPMorgan Chase & Co., Washington Mutual Inc., Citgroup Inc. and Wachovia Corp. Another bank, Wells Fargo & Co., didn't return calls seeking comment.

http://www.law.com/jsp/nlj/PubArticlePrinterFriendlyNLJ.jsp?id=1202427898741&slreturn=1&hbxlogin=1

[wroberts189]

29. This is unbelievable.. they make a bet ..you die they win. WTF? nt

[earth mom]

30. Fuck those corporate mo fos!

:grr:

[Lyric]

35. Something similar to this happened to my domestic partner, Rhythm.

She was working for a fast-food place as a cook a few years ago. After a while her "benefits" kicked in (including her joke of a health plan, which she dropped because it covered practically nothing.) However we found it odd that, while she remembered reading in her paperwork something about a life insurance policy, and she had a small premium coming out of her paycheck, she had never been given a beneficiary form to fill out. As her Mom is a Freeper, she wanted to make sure that LyricKid and I were listed as beneficiaries.

We called the store and they had no idea, but they gave us the number for the insurance company. It took us hours on the phone because they didn't want to tell us, but eventually we discovered that she did indeed have a life insurance policy--with the corporate owner of the fast-food place as the default beneficiary.

Apparently, they had filed the paperwork and listed *themselves* as the beneficiary without giving Rhythm a chance to choose her own. Not exactly "Dead Peasant" as described above because she WAS paying at least part of her own premium, but close enough to be chilling. We asked the insurance company how to change beneficiaries and they sent us a form in the mail.

A month or so after that, the store started hiring new people and cutting the hours of workers who'd been there a long time (like Rhythm) and she quit to find a job with better hours. We didn't notice the coincidence at the time. Maybe it WAS just a coincidence. But then again, maybe not.

[Bluenorthwest]

36. Dead Peasant Policies are exposed and well explained

In Michael Moore's new movie, from what I hear. Seems it makes it understandable even to the obtuse folks in cubicle world. This is about to be very common knowledge.

[ElsewheresDaughter]

39. That's great....Now I am looking forward to seeing it on Friday....thanks.

:hi:

[treestar]

40. They are paying the premiums

so what is the benefit to these companies of paying those premiums?

It may just be the disruption that occurs when they have to replace someone? If so, how can it apply to "peasants?"

I say move on, nothing to see here, focus energies on the healthcare battle.

[ipaint]

49. Tax shelters.

What else would it be, none of them pay their fair share of taxes if they can weasel out of it.

"Without their knowledge or consent a company as beneficiary can subsequently borrow money against the policy and then claim the interest as a tax deduction. While the employee lives, the company gains from the loans and tax break. When the employee dies, the company gets the death benefit pay out yielding billions of dollars."

http://en.wikipedia.org/wiki/Corporate-owned_life_insurance
http://moneycentral.msn.com/content/Insurance/P64954.asp

Every dollar in taxes they weasel out of is a dollar we could be putting towards universal care.

[Bette Noir]

41. It's never good for a corporation to have a financial interest in someone's death.

It's the reason health insurers refuse benefits, once someone gets sick.

Thank God my husband's employer doesn't show up on that list.

[TwilightGardener]

46. How 'bout you expose your employees to dangerous/unhealthy working conditions, and

then collect when they die? Ha ha! Genius! You're right, I would never want anyone to see monetary gain in my dead body. Just bad news.

[1monster]

50. Dead peasant insurance used to be illegal in Florida, but I see Florida companies on that

list.

I have to wonder if the law changed under Jebbie?

[RepublicanElephant]

51. randi rhodes about to discuss this.

she said companies can still have your policy in force AFTER you've left them!
http://2005.progressivetalk1150.com/cc-common/ondemand/player.html?world=st

maybe time for a class-action lawsuit?

[Canuckistanian]

52. Wow. Randi Rhodes is talking about this now

I had no idea this was being done.

And people wonder why corporations are hated.

[Willo]

53. Not a whole lot of incentive for employers to provide a stress free, healthy work environment

We can hire you, kill you and collect. A triple win.

[jwirr]

54. No wonder they do not like OSHA. I have always wondered it the

banks insure their debtors without their consent.

[Trillo]

57. We're all "peasants" now.

It should be illegal for any corporation or corporations to leverage "peasants" in such or similar ways.