Senate Finance Committee OKs COLI Provision
The life insurance industry is praising the Senate Finance Committees vote in favor of a corporate-owned life insurance measure aimed at combatting allegations of abuse.
Frank Keating, president of the American Council of Life Insurers, says the COLI language ensures the continued viability of the product.
“The committee got it right in tying COLI coverage to employee consent and in requiring employers to make covered employees aware that coverage can extend post-employment,” he says.
Bob Plybon, president of the Association for Advanced Life Underwriting, Falls Church, Va., says thousands of insurance jobs are connected to COLI, in addition to its being an important factor in providing employee benefits.
David F. Woods, CEO of the National Association of Insurance and Financial Advisors, says that while the legislation is not perfect, it represents a compromise the agent community can support.
Under the legislation, the death benefits on COLI policies covering rank-and-file employees who die more than one year after leaving employment would be taxed.
The death benefits on COLI policies covering highly compensated employeesdefined as those earning at least $90,000 a year or in the top 35% of an employers compensation schedulewould continue to be tax-free subject to certain conditions.
Those conditions include obtaining written consent of the covered employees and notifying the employees that the coverage may continue after they leave employment.
In addition, employers must provide information about their COLI plans to the IRS.
Reproduced from National Underwriter Life & Health/Financial Services Edition, February 6, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.