Bank Executives Get Bonuses When Their Employees Die

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Photo: Photo-illustration: Everett Bogue; Photos: Getty Images, Courtesy of Paramount

This morning, more bad PR for America's biggest banks:

"Banks are using a little-known tactic to help pay bonuses, deferred pay and pensions they owe executives: They're holding life-insurance policies on hundreds of thousands of their workers, with themselves as the beneficiaries....The insurance policies essentially are informal pension funds for executives: Companies deposit money into the contracts, which are like big, nondeductible IRAs, and allocate the cash among investments that grow tax-free. Over time, employers receive tax-free death benefits when employees, former employees and retirees die."

Okay, so this practice has been around for a while and it might be kind of unfair for the Journal to bring it up now when "America hates us," as a friend of ours who works for Bank of America (the company with the most life insurance on employees, $17.3 billion, according to the Journal) announced the other night, glumly, as if she were someone loosely affiliated with Al Qaeda and was expecting to soon have to take cover in a cave or something. And in reality this is more nuanced than it sounds. But, still, we have to laugh at how ludicrously, hilariously bad this looks. Even the headline: BANKS USE LIFE INSURANCE TO FUND BONUSES. What next? Will we find out that the bulk of Ken Lewis's 2008 salary was largely financed with the proceeds of puppy mills?

Banks Use Life Insurance to Fund Bonuses [WSJ]