COLI – Corporate Owned Life Insurance

Dead Peasant Life Insurance
Janitor Life Insurance

A Wall Street Journal article says that corporate-owned life insurance is evil. It is evil.
It’s more evil than the executives that it’s purchased on.
There’s an article at least once a week on corporate-owned life insurance, and today, more so than ever, there’s been a lot of talk in the marketplace about what’s going to happen to the future of corporate-owned life insurance.
Sen. Jeff Bingaman (D-NM) has been on a crusade for probably three years to try to eliminate corporate-owned life insurance.

— David S. Hauptman

2003 – SOA – Pension Plan Investment Strategies, rsa03v29n311pd – Society of Actuaries – 29p

The COLI cases drew attention to the practice of many large employers to maintain blocks of life insurance on large numbers of employees. Although the business purpose of the strategy was well known among companies and practitioners, in the popular press the practice sometimes was referred to as “janitor insurance”³⁶ and “dead peasant insurance.”³⁷ In turn, this led to a broader public policy debate about appropriate limitations, or best practices, around COLI. The deduction limitations of Section 264, although effective in preventing tax deductions with regard to tax-preferred income generated by COLI, did not address corporate behavior that one might characterize as “best practices” when insurance was purchased on the lives of employees. Against this backdrop, Congress enacted Section 101(j) in the Pension Protection Act of 2006.³⁸

2019 – SOA – In the Beginning . . . A Column Devoted to Tax Basics Why Do Limitations Apply to Owners of Life Insurance Contracts, Particularly COLI?, By Bryan W. Keene and Mark S. Smith, tax-2019-vol15-iss2-keene-smith – Society of Actuaries – 8p