NU Online News Service, March 5, 11:08 a.m. — Washington
Equity split-dollar life insurance came under fire on Capitol Hill recently following revelations that former Enron chairman Kenneth Lay had a large policy paid for by the now bankrupt company.
At a Senate Finance Committee Hearing, Sen. Blanche Lincoln, D-Ark., asked whether split-dollar life insurance, which she described as a taxpayer-subsidized benefit that goes mainly to corporate executives, represents good tax policy.
In a discussion with William F. Sweetnam Jr., benefits tax counsel with the Treasury Department, Lincoln noted that Enron paid a total of $1.23 million in premiums on a $12 million split dollar life insurance policy.
She said Enron would be able to recoup the premium, while Lay could borrow against the policy tax-free or leave the funds to his family tax-free.
In effect, Lincoln said, split-dollar is really a tax-deferred investment wrapped in a life insurance policy, which the tax code allows and the American taxpayer pays for.
She asked whether new Treasury Department rules on split-dollar are appropriate.