Workers' Lives: Best Tax Break? Wall Street Journal (02/19/03) p.C1; Francis, Theo
Corporate-owned life insurance (COLI) is estimated to cost $9.3 billion in lost tax revenue, according to the Bush administration, but many experts agree that the estimate could be too low. COLI, also known as janitors insurance, has become a popular tax shelter among companies in recent years, especially since companies are not required to disclose how they utilize the policies. These insurance policies, which pay the company when an employee dies, are even useful when workers retire or leave the company. However, experts state that the biggest benefit to the policies is tax incentives--the tax-free growth of cash over the actual insurance premium put into the policy. In addition, tax exemptions allow companies to determine how much income the insurance policies are creating, which is reflected on their income statements annually. American Council of Life Insurers representative Jack Dolan states that the tax incentives for life insurance allow companies to pay for employee benefits, and improve long-term investment strategies in capital markets. However, it is unclear how much life insurance is being purchased by companies, which makes it impossible to determine how much money is not reaching government coffers.