Banks Use Worker Life Insurance to Pay Exec Bonuses

Dead employees keep on giving
By Rob Quinn,  Newser Staff
Posted May 20, 2009 4:31 AM CDT
Banks Use Worker Life Insurance to Pay Exec Bonuses
Banks holding life insurance policies stand to reap $400 billion from the deaths of former employees in decades to come.   (Shutter Stock)

Former employees of the big banks often end up handing the bosses a final reward when the workers die, the Wall Street Journal reports. The banks have taken out life insurance policies on hundreds of thousands of workers, and the tax-free death benefits are used to finance executive compensation and reduce the drag that interest on deferred pay has on earnings.

Banks hold a total $122.3 billion in life insurance on employees, according to filing analyzed by the Journal, and stand to collect $400 billion on the policies in decades to come. Banks aren't the only ones to use the practice—dubbed "dead peasants insurance" by some—but they pour the most money into it by far. The Treasury Department is considering moves to rein in the practice, although their proposal would leave the tax breaks bank gain from it untouched.
(More life insurance stories.)

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