NU Online News Service, Jan. 27, 2004, 6:51 p.m. EST, Washington – The Senate Finance Committee’s draft language on corporate-owned life insurance is getting good reviews from life insurance industry groups.[@@]
The committee’s COLI draft unambiguously resolves concerns over notice and consent and coverage of rank-and-file employees, the groups write in a joint letter of support.
“The COLI draft includes a number of positive provisions that follow industry ?best practices’ concerning this critical employee benefit funding vehicle,” the groups write. “The concerns expressed in the media regarding employees being insured without adequate notice and consent are fully resolved by this COLI draft.”
The letter came in response to a request for comments on the draft by the Finance Committee.
The letter was signed by Frank Keating, president of the American Council of Life Insurers, Washington; Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va.; and David Woods, chief executive officer of the National Association of Insurance and Financial Advisors, Falls Church, Va.
The letter says the draft represents a “thoughtful compromise” relating to COLI concerns.
Specifically, the letter says, the draft includes a robust consent requirement under which all covered employees must receive advance written notice of coverage. The notice must disclose the fact that the coverage may continue after employment ends.
Moreover, the letter says, employees must give written consent before their employers can insure them.
The draft also prohibits employers from excluding from taxation income on death benefits for coverage on rank-and-file employees.
“While there are many appropriate situations under which an employer may have insured these employees, including using COLI policies to provide employee benefits to the same insured employees, the coverage for these employees has been the subject of considerable debate,” the letter notes. “The draft takes a conservative approach on this issue by essentially eliminating coverage for rank-and-file employees.”
A Finance Committee vote on the draft was scheduled for Wednesday, but it has been postponed until the committee finishes work on a transportation bill.