NU Online News Service, Oct. 23, 2003, 6:10 p.m. EDT — Washington
Legislation that would severely restrict use of corporate-owned life insurance is based on myths that fail to reflect the current business environment, according to life insurance industry representatives.
Witnesses from agent and insurer groups testified today at a hearing of the Senate Finance Committee that COLI is a vital tool for funding employee benefits.
Stories of alleged abuses involve policies that are no longer sold, the witnesses said.
Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va., said sensationalist news stories have presented a grossly distorted picture of COLI.
Speaking on behalf of AALU and the National Association of Insurance and Financial Advisors, Falls Church, Plybon cited stories about “janitor’s insurance” as one example.
The “janitor’s” policies were policies written before 1996 that covered rank-and-file workers, apparently without the workers’ consent, Plybon said.
However, Plybon said, the old janitor’s policies bear no resemblance to current COLI programs.
The tax benefits associated with the old programs were eliminated by Congress in 1996, Plybon said.
Moreover, Plybon said, COLI today generally covers only managerial employees, and almost all employers obtain the consent of the insured employees.
In addition, Plybon said, COLI does not represent a “corporate windfall.”
To the contrary, he said, COLI policies are used to fund the cost of new or expanded employee benefits.