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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