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  • 2015-03-18 (xsd:date)
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  • Do Corporations Routinely Buy 'Dead Peasant' Insurance? (en)
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  • In April 2002, the Wall Street Journal published an article titled Companies Profit on Workers' Deaths Through 'Dead Peasants' Insurance, describing what was then a little-known practice wherein large companies purchased corporate-owned life insurance (or COLI) policies on low-level employees in order to garner tax breaks and profit from their deaths (even if those employees had long since ceased working for the companies that took out the policies). That article addressed the more colorful name by which the practice had become more widely known in subsequent years, dead peasant insurance, and how it grew to become common after regulatory changes in the 1980s: The article focused in part on the 1992 death of former retail employee Felipe M. Tillman, aged 29, and a policy for $339,302 paid out to the parent company of the music store that briefly employed him. According to the piece, a lawsuit filed by the deceased's relatives exposed the fact that CM Holdings used $168,875 of the death benefit on Mr. Tillman for executive compensation. However, executive compensation was only one use for such insurance policies cited by the companies interviewed about COLI payouts, as insurance funds were applied in a number of ways to company expenses of varying descriptions. A case involving Winn-Dixie's use of COLI policies was pivotal in drawing attention to the issue, and Tillman's brother testified before the U.S. Senate Committee on Finance about the issue in 2003: Interest in dead peasant insurance policies was spurred by the release of Michael Moore's 2009 film Capitalism: A Love Story. That documentary featured interviews with the family of a woman who once worked as a cake decorator for Walmart and died of asthma complications while in her twenties. Her family maintained that they did not receive any portion of the insurance proceeds paid out to Walmart after her death: That segment was one of the most powerful scenes in the film, and its details were among the most memorable. However, Moore clarified that Walmart had long discontinued the practice of obtaining life insurance policies on rank and file employees years earlier following a larger lawsuit initiated by families of deceased employees insured by that giant retail chain. While many viewers inferred that such policies presented a frightening incentive in regard to employee mortality rates, the larger view of the life insurance schemes amounted to a debate about corporate tax loopholes: In 2006 (three years before the release of Capitalism: A Love Story), Walmart settled a class-action lawsuit brought by families of employees insured under COLI policies in the 1980s and 1990s: While corporate-owned life insurance was once a reasonably common practice in big business, the Pension Protection Act of 2006 removed its primary function as a tax loophole. And although the proceeds of such policies previously paid out after the deaths of low-level employees on occasion funded executive salaries, their primary purpose was not to generate corporate profits based upon higher worker mortality rates. Increased scrutiny in the early 2000s (and corresponding litigation) led to the decreased use of dead peasant insurance policies after 2006. (en)
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