Insurance used to pay bankers’ bonuses

The Wall Street Journal is reporting that some of the biggest banks are using insurance policies to pay for their employees’ bonuses, with banks serving 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.

WSJ also produced this chart showing the biggest policyholders of life insurance:


The paper adds:

In recent years, the Office of the Comptroller of the Currency affirmed that banks can buy life insurance to finance employee benefits. But filings show that executive compensation accounts for most of the benefits.

Over the coming decades, banks are expected to benefit some $400bn from the deaths of employees.  The process is legal, but I do agree that the idea of profiting from the deaths is a bit unacceptable.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s