Why is My Boss Looking at Me Like That?

Little known insurance practice has execs collecting when workers die

You might be worth a lot to your boss -- dead.

A common, but little-known practice among banks is to take out life insurance policies on employees, then use the proceeds to pay bosses if the workers croak, reports The Wall Street Journal. Some call the death benefits "mortality dividends," while others use the term "janitors' insurance."

The money is most often used to fund bonuses, deferred pay and pensions for executives.

Banks had a total of $122 billion in life insurance on employees at the end of last year, according to the Journal. Bank of America led the way, with $17.3 billion in coverage. It is not known if the same practice is as widespread in other businesses, because only the banking industry is required to report it in regular filings.

The policies work much like pension funds for the bosses. Companies take out the policies, which are invested and grow tax-free like IRAs. When employees, current and retired, die, the  execs cash in. Employees, who have to consent to policies which make others the beneficiary of their death, are sometimes encouraged with financial incentives.

As distasteful as the practice may be, it is legal. Congress did move to rein it in with a 2006 law that said companies can only take out policies on their top third highest-paid workers. But policies taken out before that are unaffected.

The Journal analysis showed than banks stand to collect $400 billion in death benefits in the coming decades.

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