Death policies not a budget fix

Louisiana state employees beware. You are being targeted, but this time it is not by pending budget cuts. You are being eyed by legislators wanting to benefit from your demise.



A bill before the state House of Representatives (HB-386) would enable the state to purchase life insurance policies on you and be the beneficiary upon your death, either as current employees or retired civil servants.

Corporate-owned life insurance is a practice that remains common within big business, even though corporations have been slapped with multiple lawsuits because of it.



Corporate-owned life insurance is better known as dead peasant insurance. It is a policy typically taken out on employees without their knowledge. The sole purpose of which, regardless of how human resource departments try to spin it, is for the beneficiary to profit on the demise of a worker.



One lawsuit that exposed the practice was brought in 2001 against Winn-Dixie after the grocer had taken out dead peasant policies on 36,000 employees without their knowledge. Other corporations that have been found to carry dead peasant insurance include AT&T, Dow Chemical, Nestle and Wal-Mart.

In 1996, Congress moved to restrict companies from borrowing against secret life insurance policies, and the IRS sued nearly 80 corporations to collect back taxes from interest earned on loans secured with dead peasant plans.

Federal laws were drafted in 2006 to prohibit the practice, and several states began outlawing corporate-owned insurance.

Admittedly, most employees appreciate having group health and life insurance plans offered through their employers. But the intention of workers taking out life insurance policies is normally thought to be a way they, with help from the employer, would provide for their families, or at least cover funeral expenses.

The idea of policies being secretly taken out on employees for the sole purpose of turning a profit, or having collateral for a loan, is a repulsive example of excessive greed. Privately held corporations have hidden the practice. Government has no business considering it.

The state of Louisiana is facing hard decisions this legislative session as it focuses on a $24.9 billion budget with a $1.6 billion deficit. Many ideas to balance finances should be taken into consideration. Meeting budgetary needs based on the anticipated death of state workers is not one of them.