Life insurance agents and companies are fighting legislation in California that would severely limit the use of corporate-owned life insurance.
The legislation, A.B. 226, which is sponsored by Assemblyman Juan Vargas, D-Chula Vista, would effectively bar employers from covering nonexempt employees (that is, rank-and-file employees) with a COLI policy.
COLI would still be permitted for exempt, or key, employees.
Moreover, the prohibition would apply retroactively, thus nullifying contracts already in place.
John Mangan, director of state relations for the Pacific Region with the American Council of Life Insurers, Washington, says that the California legislation would undermine broad-based COLI policies that are used to fund employee benefits, including health care.
While there are concerns in California, he says, that broad-based COLI policies have been used in ways that the benefits flow to executives, that is not the typical use of COLI.