Full Version: Life insurance to company?
I know a broker who pays for his client's group life insurance premium. As part of his marketing campaign, if you hire him, he'll pay for $10,000 of life insurance for all of your employees. The employees name the beneficiary. Is this legal? Its actually a fairly well know company.
I guess the question you are asking is does this run afoul of your state's anti-rebating laws. I would think so but am not sure. In general, agent's are not allowed to offer financial inducements to a client to write their insurance coverage. Direct financial inducements are seen as a rebate of commission and not allowed. But when it comes to additional services / products, each state insurance commission sets the rules. Some are very strict and and disallow brokers offering employee web portals, COBRA administration services, and other HR related services at no cost. Others see these as a service complementary to the insurance sale and allowable. Put "insurance anti-rebating" into google and you will see a number of articles on the subject.
The only way to know for sure is to contact your state's insurance dept and ask their stance. They may have a fairly explicit write up on whats allowed and not.
The only way to know for sure is to contact your state's insurance dept and ask their stance. They may have a fairly explicit write up on whats allowed and not.
QUOTE (Benny Guy @ Feb 17 2009, 08:08 PM) 
I know a broker who pays for his client's group life insurance premium. As part of his marketing campaign, if you hire him, he'll pay for $10,000 of life insurance for all of your employees. The employees name the beneficiary. Is this legal? Its actually a fairly well know company.
QUOTE (taylorjeff @ Feb 18 2009, 04:25 PM)
I guess the question you are asking is does this run afoul of your state's anti-rebating laws. I would think so but am not sure. In general, agent's are not allowed to offer financial inducements to a client to write their insurance coverage. Direct financial inducements are seen as a rebate of commission and not allowed. But when it comes to additional services / products, each state insurance commission sets the rules. Some are very strict and and disallow brokers offering employee web portals, COBRA administration services, and other HR related services at no cost. Others see these as a service complementary to the insurance sale and allowable. Put "insurance anti-rebating" into google and you will see a number of articles on the subject.
The only way to know for sure is to contact your state's insurance dept and ask their stance. They may have a fairly explicit write up on whats allowed and not.
The only way to know for sure is to contact your state's insurance dept and ask their stance. They may have a fairly explicit write up on whats allowed and not.
QUOTE (Benny Guy @ Feb 17 2009, 08:08 PM)
I know a broker who pays for his client's group life insurance premium. As part of his marketing campaign, if you hire him, he'll pay for $10,000 of life insurance for all of your employees. The employees name the beneficiary. Is this legal? Its actually a fairly well know company.
What differentiates this, which does sound like rebating, from brokers offering Section 125 plans, COBRA administration, FSA discrimination testing, health fairs, etc.? Anything?
Nothing does.
An employer considering whether to allow the arrangement that Benny Guy describes might want its lawyer's advice about:
whether a purported life insurance policy really is a contract enforceable against the insurance company;
whether the IRC 79 exclusion from income might not apply because the arrangement might not be group-term life insurance carried by the employer;
whether the employer must tax-report as its employee's wages the fair-market value of the life insurance protection (if any) provided;
whether the employer must withhold FICA taxes and Federal and State income taxes from those wages;
whether the arrangement is an ERISA-governed plan;
what fiduciary and other responsibilities the employer has under ERISA or other law.
whether a purported life insurance policy really is a contract enforceable against the insurance company;
whether the IRC 79 exclusion from income might not apply because the arrangement might not be group-term life insurance carried by the employer;
whether the employer must tax-report as its employee's wages the fair-market value of the life insurance protection (if any) provided;
whether the employer must withhold FICA taxes and Federal and State income taxes from those wages;
whether the arrangement is an ERISA-governed plan;
what fiduciary and other responsibilities the employer has under ERISA or other law.
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