New York Tightens Key-Person Definition

- The employee is responsible for management decisions, has special skills or relationships with customers, or has some other skill or attribute that would be hard to replace.

New York is tightening the definition of “key person” because it lets companies choose between insuring employees with ordinary company-owned life insurance and key-person COLI.

When employers cover rank-and-file employees with ordinary COLI, they must notify employees about the existence of the insurance, get the employees’ consent and recognize certain termination rights, New York Insurance Superintendent Gregory Serio writes in a statement about the key-person definition regulation.

The notice, consent and termination rights requirements do not apply to key-person COLI.

The new key-person definition “will serve to ensure that employees insured pursuant to the insurable interest provisions of [the key-person insurance law] are key employees,” Serio writes.

New York has posted the emergency regulation and Serio’s statement on the Web at http://www.ins.state.ny.us/re180txt.htm