I’m happy to have given the blog some action. My own blog has attracted virtually no comment, so I know the feeling of shouting out into the wilderness and getting little or nothing of substance back.

Have a good holiday and best of luck.

LJK
.-= Lawrence Kramer´s last blog ..C-CSPAN and the Law of Unintended Consequences =-.

0l. Once again, my initial research (which again, I’ll admit as being more focused on opponents of these policies than defenders) was the source of the name. I’ve added something of a disclaimer to the beginning of the post, using the proper name (Corporate Owned Life Insurance) and entreating people to view this discussion currently evolving in order to get a more complete picture of these policies. Short of rewriting the entry (which would have the unfortunate side effect of rendering this discussion almost nonsensical), I’m not sure what more to do to show my increased understanding of the situation.

1. I’ll admit, I know little about the grocery and discount retail industries, which seem to be rather competitive and bottom line oriented. I’ll also agree that it was unlikely that the proceeds from these policies were going to pad the CEO’s wallet without any of the shareholders, employees, or customers benefiting at all. From reading your comments and expanding my own research, it does seem to be a fairly innocuous, if somewhat morbid sounding, method of working with tax laws as written. As for how fair it is, well, that’s an argument for a whole different day, since this one is already getting rather long.

2. Conceded as a bad turn of phrase on my part.

3. To be fair, I DID look; however, I clearly didn’t do the required due diligence into all sides of the issue that something as complex this required. In the future, I shall endeavor to get all sides of an issue, although when I’m not even sure there IS another side (as you noted, the companies with these plans weren’t exactly running full page ads touting their advantages to both the companies and employees), it will be pretty hard.

4. Fair enough; I doubted that the statistics would be generally available, and as you say, that doesn’t ensure that everyone who gave consent really understood it, either. I’ll also admit the concept that the policies are pro-employee, while obvious after reading everything you’ve written, would have completely bewildered me if I had come across it during my initial research (at least, not without a great deal of evidence to back up the claim). Well, at least this page will serve as some indicator of the true purpose of such plans, I suppose.

5. After gaining a more complete and well rounded view of these plans, I can see that what worries I had were overblown at best, and completely unfounded at worst. I do thank you for all your comments, and hopefully anyone out there doing research on such plans will also benefit from your comments.

It’s interesting to me to watch how bloggers react to my posts on this subject. I would give you a B- on the curve of responses I have seen. You recognize that you overstated the case, but you are clinging to annoyance where outrage no longer works. Let me be specific:

0. This stuff has come to be called “Dead Peasants Insurance” because someone thought it would arouse the taorch and pitchfork crowd. If that’s all you need to use it, too, carry on.

1 I’m sure peope hate corporations for trying to dodge taxes, but can you think of a more competitive industry than groceries or discount retail? Do you really think that Walmart somehow planned to pocket the tax advantage it sought to get from Janitor COLI? Or, as is more likely considering its business model, do you suppose they planned to use it to reduce prices and win market share? Not all tax schemes benefit anyone other than the schemer (or his lawyers, accountants, and insurance agents), but Walmart and Winn-Dixie most likely planned to share their gains, however indirectly, with their customers in order to get more of them. I’m not saying it’s a fair advantage or good for the public fisc, just that it is what it is.

As for treating employees as cogs in a machine, nothing about janitor COLI supports the “more than” language in your claim. A better phrase would have been “to some extent,” which is no big deal, really.

2. See 1.

3. I fully allow that this stuff looks pretty bad to the uninitiated. My question is why you leapt before you looked. I suspect it had something to do with your pre-existing low opinion of the people you’d be saying untrue things about. It all boils down to our innate sense that any stick is good enough to beat a dog.

4. I don’t know how many companies got consent, nor do I believe that even people who gave consent knew what they were consenting to. But I start with the “no harm” position of experience rating, so I don’t really care whether consent was obtained or not. This is the hardest thing to get your brain around: because of the tax aspects of these plans, only survival produced benefits for the company. All of the incentives were PRO-EMPLOYEE. Still, given how complicated this stuff is, and how quiok demagogues like Moore would be to misdescribe it, maybe you’ll forgive companies for not running the good news up the flagpole. (The only reason companies gave a benefit to employees when they died was to assure that the company would be advised when the death occurred. Otherwise, the company would be claiming tax benefits on policies that had actually matured. Now THAT would be pure Gogol.)

5. I can’t guess how upset about Janitor COLI you are under the facts as I’ve described them. I don’t think the tax schemes is defensible either, but would you really have posted at all if you believed what I’ve written?
.-= Lawrence Kramer´s last blog ..C-CSPAN and the Law of Unintended Consequences =-.

It’s good to see such a vigorous and lively response to something I wrote, particularly so long after I had even forgotten that I mentioned it. You make some very good points, and I’ll be the first to admit, I didn’t do a tremendous amount of research in attempting to find the corporations’ perspective on how and why such policies exist. I am currently attempting to redo my research, and I think I can respond to many of the points you’ve made here:

0. You’ll forgive me using a common term which has been mentioned by everyone from Liz Weston: http://moneycentral.msn.com/content/Insurance/P64954.asp to ABC news: http://abcnews.go.com/GMA/dead-peasant-life-insurance-policies-fair/story?id=8724327&page=1 Not being a corporate lawyer or someone involved in the insurance industry, I used the most common, descriptive term I found in the course of my research. As for Mr. Myers, having not encountered him in my research before writing this, I didn’t think to include anything about him, hostile or not, in the blog entry itself.

1. I can see, with a bit more research, that there are non-sinister reasons that companies might use these, let’s call them ‘janitors’ policies’, to use another common nickname. Still, using rules regarding life insurance as a ‘cropper’ for tax purposes still combines two things that many Americans hate most about corporations: their attempts to dodge taxes by any means possible, and their treatment of employees as cogs in a system rather than individuals. The whole situation still comes off as pretty bad form, albeit for different reasons.

2. That’s a fair point, although it does bring us back to the whole ‘employees were used more like tax-deferred saving accounts than like people’ concept.

3. Again, I concede to the logic of your point; although I’d hope you’d allow that to an outside observer who knows little about corporate tax policy (i.e., someone like me), it looks like the company is trying to make a buck off the eventual death of a former employee. (A perception that is only reinforced by being the interpretation of many of sources I read, including those already cited.) Frankly, as mentioned in my initial number three point, this might be much more of a non-issue if the policies in fact were being used to protect the company from economic harm from the loss of an employee. (Also, I’ll be honest, that’s a pretty creepy story of how the policies got their disreputable nickname.)

4. Fair enough. I haven’t seen any statistics regarding how many of these policies were issued with the consent of those being insured vs. the number that were uninformed, so I’ll take your word that most people were informed of the situation. (Although, I’m actually pretty curious as to what the numbers actually are, if you know where I could find such information.) In addition, since this practice of insuring someone without their knowledge and consent has been illegal since 2006, it’s something of a moot point now, anyway. That said, even if only a relatively small portion of the policies were obtained without the employees’ consent (whether due to a corporate policy or simple human error), it does give the whole concept a bit of a black eye.

5. Again, freely conceded as a misunderstanding of the true purpose of these policies on my part, although as noted in my revised number one, I’m not sure the correct interpretation paints the companies that use such policies in a much better light.

I am appreciative that you decided to grace my humble little blog with your presence, even if only to correct me. I hope that if write more on this policy or other insurance related matters in the future, that you’ll share any critiques you have that I can attempt to provide the most accurate information possible.

0. It’s not called “dead peasant insurance” by anyone in the industry. It’s called that by Atty. Mike Myers and others who accept his misnomer. A hostile lawyer’s error should raise ethical issues about the lawyer, but not about the product.

1 Almost all major COLI programs were “experience rated,” which means, simply, that whatever a company got in policy proceeds it had to pay as premiums in subsequent years. That’s one of the reasons the plans came a cropper for tax purposes. The court found that there was no there there.

2. No net gain from deaths means no conflict of interest for employers. On the contrary, only living insureds provided the tax benefits – so the employer’s interest was in prolonging life, not shortening it. But you’re right about the movie plot – CSI Miami did it last night.

3. Since the employer profited from the ongoing policies and not from the death proceeds, the fact that the policy continued after employment doesn’t matter. But you – and Mr. Myers – might be interested to learn that the term “dead peasants” referred to these former employees, not to the deceased insureds. The reference was to a Gogol novel (Dead Souls), which had something to do with a census in which dead bodies could be counted. It struck us that getting a tax break by insuring former employees was something like getting one for buying dead peasants.

4. Most COlI plans were disclosed to employees and consent obtained. Whether that was true in any given case I can’t say. But, since we have disposed of the claim that the insurer benefited from deaths, the icing is on a non-existing cake. Very zen, this compounding of a non-event.

5. Number one would certainly bear repeating if it were true. Given the actual state of affairs, however, maybe not so much.

(Yes, I’m the guy to whom Myers attributes the “dead peasants” term, so I have some acquaintance with the matter.)