Lawmaker Targets ‘Dead Peasants’ Insurance

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Imagine your spouse is a janitor or teller at a bank. Now imagine she passes away and you find out the bank took out a life-insurance policy on her. But the bank isn’t sharing the payout with you.

A documentary film that opened nationwide Friday is reviving a debate about employer-owned life insurance.

A Congressman from Chicago says the film inspired legislation that would prohibit such insurance on all but top-paid employees.

Until the 1980s, companies could take out life-insurance policies only on key personnel. Then many states started allowing employer-owned insurance on rank-and-file workers.

That coverage became known in business circles as janitors insurance or even dead-peasants insurance.

Buying this coverage and borrowing against it helped hundreds of large firms generate billions of dollars in tax breaks. They also got a stream of tax-free death benefits.

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How much are you worth dead to your company?

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Wall Street Journal: "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."

Does yours?

Dead Peasant Policy: Washington Post Primer

• Industry slang for insurance policies taken out by corporations on the lives of thousands of their rank-and-file employees, usually without workers' knowledge or consent.

• An insurance product that allows corporations to earn tax-free investment income on money put aside for retiree health and pension benefits

• According to articles in the Houston Chronicle and Wall Street Journal last week, a questionable gambit used by at least 100 large corporations to boost profits by taking advantage of the tax-shelter features of life insurance.

• The source of an estimated $6 billion in lost tax revenue to the Treasury each year and the subject of several pending tax court cases.

• A product actively marketed by the insurance industry as an "attractive, off-balance-sheet asset."

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