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TREASURY COLD ON TAXING LIFE INSURANCE ON EX-EMPLOYEES
October 23, 2003
The Senate Finance Committee held hearings today on the proposal to tax proceeds on life insurance policies for employees who had been retired for 12 months or more.
The Treasury issued its written testimony this afternoon; the administration, in the person of Gregory Jenner, Deputy Assistant Secretary (Tax Policy), seems unenthusiastic:
"Limiting the tax advantages of COLI to situations in which the insured individual remains an employee would severely limit the use of COLI to fund retiree benefit plans. Retirees are, by definition, no longer employees, yet the obligation of businesses to fund their benefits often continues. As described earlier, COLI is often well-suited for that purpose. Such a restriction would result in businesses using less-efficient means of funding these benefits, or dropping the benefits altogether."
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