Unlike Han Solo to Boba Fett, Mickey is worth a lot more to Walt Disney dead (at least the person inside the suit).
I had heard of these before (and M. Moore's new film exposes it quite a bit as well), but I was surprised, although I don't know why, to see Walt Disney on this list of corporations that purchase these so-called "dead peasant" policies.
What do you think about this?
Incidentally, Hershey is also on the list. How many full-time Hershey Park workers are on their list. Creepy stuff.Last edited by OhioStater, Friday, March 19, 2010 1:24 PM
I don't see a problem. As an employee, you add value to the company. If you suddenly die, the company has lost that value. If that company feels your value was enough to warrant the insurance premium, so be it. It's not much different from property insurance, really.
And this (from the linked article) kills me:
Jane St. John had two children and was pregnant with a third when her husband, a butcher at a Winn-Dixie store, was killed in an auto accident. When the Killeen, Texas, woman called the company to ask about insurance, she said she was told about a $17,500 policy to which she was entitled. St. John said Winn-Dixie told her nothing about the $102,000 the company collected from a corporate-owned policy on his life. She found out about it this summer, eight years after his death, from a lawyer who researched court records. The idea that the company would secretly insure lives, and then not share the benefits with the families, "is sick," she said. "That is creepy."
Why should the company share that money? If the woman was so worried about post-death compensation, why not buy a larger policy?
Before I even started to read the article, I knew Walmart did this kind of thing. I guess they got 'caught' doing it YEARS ago and someone was upset. We talked about it in orientation when I worked there (not that it was part of the orientation, but our HR person was talking about it).
But, seriously, if they pay the premiums on the insurance then it's their money to get back. I don't see a big problem with this. It's kind of in the moral grey area for me, but I wouldn't care if someone had this kind of insurance on me.
As an employee, you add value to the company.
No offense to such people, but I'm not sure a company like Wal-Mart takes much of a hit when a cashier dies while employed.
Not to mention collecting money from policies on people who have long since left a company.
From a legal viewpoint I don't think there's much of an issue. But it seems like a bad practice for businesses to engage in.Last edited by Gemini, Friday, March 19, 2010 2:16 PM
Oh, I agree that there's a lot of murky grey area with regard to value (to say nothing of the tax issue mentioned in the article), but that's the case with most insurance-related stuff anyway, in my opinion.
This bit of information should be highlighted too:
"The controversy helped convince Walt Disney and Wal-Mart, among others, to drop the policies. Winn-Dixie battled the IRS in court, but the supermarket chain recently lost its final round when the Supreme Court refused to review a lower court decision that backed the IRS."
I was not questioning the legality of the practice, but rather the morality.
I will say that the tax-free status of such payouts is highly questionable.Last edited by Gemini, Friday, March 19, 2010 3:49 PM
I would guess that some of this insurance is actually called for. I can see companies having insurance policies on their executives because a sudden death (Frank Wells at Disney, for instance) could have immediate and potentially catastrophic consequences.
I have to believe that sports franchises have insurance on their players because the loss of a star could impact ticket sales and other revenue streams.
Maybe if it were all out in the open it would be better. That said, individuals should have their own insurance policies to protect their families instead of relying on their companies to do that.
I don't get it. Exactly who is injured when this happens?
Companies are quite literally investing in their employees. And while the company reaps a benefit at the death of the employee, that does not mean that the company has any incentive not to keep the employee alive (in fact, quite the opposite: hurrying a man to his grave in order to collect the insurance money can cause nullification of the policy and forfeiture of the premiums paid!)
In reality, all these policies are is investment vehicles wherein the named insured is used as a maturity timer for the investment. After all, life insurance has a horrible loss ratio: every policy sold will eventually incur a loss. So buying a life insurance policy is nothing more than buying an investment with a fixed return.
The concept seems a little morbid, but I don't see that there's anything inherently wrong with it.
--Dave Althoff, Jr.
The industry refers to these as "Dead Peasant" policies. That is some fairly derogatory vernacular to use; in other words, a way to profit off of the death of one of the "common" or "little" folk...a "less than" when compared to the Lords of the manor.
They are not just purchased for "high-up" executives either. Worst case scenario, an individual passes away, and the company makes a nice chunk of change, while the family of said individual suffers; that is where it becomes morally negligent in my opinion.
No entity should "profit" from the death of a human being.
My employer pays me a salary, but also spends a ton of money on my family's health care and relocated me 2,400 milles at great expense. If I get hit by a bus and die, why wouldn't they be entitled to get something back for their loss? I don't see anything particularly immoral about that. If you want to insure your own life for the benefit of your family, that's your responsibility. (Although, my employer happens to pay for that, too.)
I confess, I don't see any problem with any of this---with the possible exception of the tax treatment of any gains.
I'm not necessarily disagreeing, but I'll ask it again. What's Wal-Mart's loss when a cashier dies? I think part of the point of the article was that many of these employees are *not* people the company has much invested in.
Also, how does the company protection arguement work when a company collects years after an employee leaves? If they're merely protecting their investment, shouldn't the policy end when the employment does?
The keyman/executive policies are meant to cover a loss though often times, the coverage provided isn't enough to cover the actual loss of a key employee in terms of creativity, leadership, etc. Sometimes lenders require those policies and sometimes they are used to help pay estate taxes.
The peasant policies aren't really being purchased to cover losses. They are being purchased as an investment. If the expected returns are greater than the costs and what return you obtain with other investments, the investment makes sense. Tax free treatment will help those returns. But because the IRS is cracking down on the legitimacy of the policies in terms of protecting against loss versus a pure investment vehicle, the tax benefits are not there making the investments less attractive. Only covering key employees or terminating the coverage when they left the company would help make the case of protecting against loss stronger.
I don't see a problem with the policies. Employees probably should be told about them (though I suspect it would be easy to include disclosure of them in the stack of documents new employees typically sign on their first day). But I don't think they should be tax free which alone I suspect makes them much less likely as an investment. Article indicates many of the policies are whole life which are typically not very efficient investment mechanisms and if the employee doesn't know about the policy, there probably are no medical exams which will increase the cost of the coverage.
People like Jane St. John and Vicki Rice probably feel that the money the companies spent on their husbands' policies should have been spent in the form of higher pay or some other benefit. Although, I'm sure these policies don't cost the companies more than a few hundred per person per year, if that. The article says 8 billion spent on more than 6 million-- but does that include all policies, or only the dead peasant ones? Even so, at around $1,300 per year, that comes out to about $0.65 per hour on average.
If someone were offered a job at any company from Wal-mart to Microsoft, and told at the time there would be a policy like this taken on them, how many people would refuse the job only for that reason? The answer can't be too much above zero.
Maybe Jeff should take out policies on his CoasterBuzz employees. Gonch would be worth millions. ;)
If anybody's worth more dead, it's me. :)
Will your family sell Q-bots for the viewing? :)
People like Jane St. John and Vicki Rice probably feel that the money the companies spent on their husbands' policies should have been spent in the form of higher pay or some other benefit.
Well, sure, we'd all like to get paid more. But, from the company's point of view, it was a straight investment, and never meant to be compensation or an employee benefit in any form. The alternative wasn't paying the husbands more, increasing their health insurance coverage, etc. The alternative was investing the money on behalf of the business in some other way.
You must be logged in to post