Senators Reach Deal On Pension Bill

The bill also includes provisions offering guidance on the use of corporate-owned life insurance, which is also known as COLI.

The COLI provision would exempt COLI policy benefits from federal income taxes if the covered employee is a director or a highly paid employee, or if covered employees are notified in writing about the purchase of the contract.

Some media reports have referred to COLI as “janitor’s insurance” and suggesting that employers are profiting from the deaths of current and former employees.

Life insurers and business groups have defended COLI, noting that COLI benefits are usually used to fund a company’s pension plan or other benefit plans.

“We are pleased that a provision to codify the industry’s best practices relating to the use of corporate owned life insurance is included within the pension bill agreement,” says David Stertzer, executive vice president of the Association for Advanced Life Underwriting, Falls Church, Va. “Corporate owned life insurance plays a vital role in protecting businesses and helping them provide employee benefits, and this provision ensures that the product is used responsibly for the benefit of businesses, employees and families.”

Jack Dolan, a spokesman for the American Council of Life Insurers, Washington, says the language in the Senate bill will help to improve COLI’s image.

“The COLI provisions in the Senate pension bill will reform the COLI market and ensure the product remains available to businesses for long-term planning purposes, such as paying employee benefits,” Dolan says. “We are looking forward to the provisions becoming law.”