- Think about it somewhere in the accounting department is two people looking over a list of employees. "So you think Fred looks well?" says the Chief something officer. "Yeah he will not do, pick Sarah she is taking up sky diving," replies the director of things no one talks about. "Well that is settled ... now lets look at last month profits. ...
Stranger then Blue Canaries, www.heydan.com/
The Axis of Corporate Evil never ceases to amaze. Dead peasant insurance, also called Dead janitors insurance, is a wide spread but little known practice among corporate entities. The "Dead peasant" is industrial slang for the rank and file employee who is worth a considerable sum of money dead or alive.
The Wall Street Journal reports that corporations by the hundreds take out life insurance policies on their own employees with the companies as the beneficiaries. When an employee dies, sometimes years after the employee has left the company, the company receives the death benefit. "Most workers covered this way don't know it, nor do their families," says the Journal.
To make matters more interesting the companies use this little gambit as a tax shelter. It allows corporations to boost profits by taking advantage of the tax-shelter features of life insurance. While the employee is alive they are a great little investment for the employer. 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. Read on:
- That was certainly the case with the family of Margaret Reynolds, a 62 year old Ohio woman who died in 1998. Her family received a $21,000 death benefit from her employer, C.M. Holdings. The money was from a life insurance policy the company provided for is employees. What Reynolds did not know during her lifetime, and her family did not know after her death, is that her employer had taken out another life insurance policy on her with itself as the beneficiary. When she died, her family received the $21,000 while her employer received an insurance payout form the "dead peasant policy" of $180,000.
Reynolds, like many other workers, had been used. Her son was outraged at the news of this deception because during the last years of Reynold's battle with Lou Gehrig's Disease, the family had "begged C.M. Holdings for $5,000 to pay for a specialized wheelchair so they could take her to church," a request the company refused.
Veniality is inherently blind to human suffering. In 1996 the IRS deemed the tax deductions improper and would no longer permit them saying that the corporate owned life insurance or COLI served no legitimate purposes; the agency "is investigating more that 85 companies that it says took 6 billion in illegal deductions." Some COLI policies even cover part-time and short-term workers and, in some cases, workers' relatives. The policies can remain in force long after the worker leaves the company. Many of the companies are challenging the disallowance saying that the death benefits go toward paying for other employee benefits but as a rule the courts do not accept that excuse.
Some argue that since the company pays for the premiums and has every right to benefit from it. Yet it's hard to ignore the fact that the company uses the employees name without compensating the employee for that use. A clear case of exploitation; in some cases if the employee is informed they have to give their approval to this practice as a condition of employment. Not only is this unethical in practice it's a big financial drain on the U.S. Treasury, as well as, a major concern to the Securities and Exchange Commission, Congress and the courts. Described as, " A product actively marketed by the insurance industry as an 'attractive, off-balance-sheet asset,'" so far it's been the source of an estimated $6 billion in lost tax revenue to the U.S. Treasury annually and the subject of several pending tax court cases.
It's all the rage among Corporate America's top 1% Enron subsidiary Portland General and Dow Chemical have engaged in this practice. Companies listed by The Examiner as taking out "Dead Peasant" policies include American Electric Power, AT&T, Ball, Basset Furniture, Eaton, Nestle USA, Olin, Pitney Bowes, PPG Industries, Procter & Gamble, Trans World Entertainment and Walt Disney. One attorney for the Hartford Life Insurance Co. hazards a guess that up to 25 % of the Fortune 500 companies have them covering the lives of 5 million to 6 million workers.
Many corporations are currently appealing the their tax dodging tactics to the 6th District Court. Wal-Mart used them in the early 90s when they were most popular as a means of sheltering income from taxes, turning liabilities into assets, and funding costly executive benefits. In 1995 Wal-Mart decided they weren't making any money from these policies and dropped the program. Maybe they mean no new policies. According to the Houston Chronicle, 5 to 6 million corporate serfs have life insurance policies held on them by Fortune 500 magnates, and Wal-Mart holds some 350,000. Wal-Mart launched a program in 1994 promising its employees a $5,000 death benefit. The company was so determined its workers should take advantage of the program that it threatened any who turned it down with the forfeiture of their health insurance.
While no longer legal in Texas, California and a few other states require written consent from employees, even so, many such disclosures don't explain where the proceeds of the death policy will go. One has to wonder how hard the insurance companies have pushed this idea. Welcome to the Brave New Corporate World where everything-- even death --has become a commodity traded by profiteers and an early demise has become the bottom line.