Discrimination through group life insurance issue

[Guest russo40]

Insurance agent "A" sold company individual policies for a group of employees defined as "key" employees for $100,000 benefit each--employees are beneficiaries not company--company pays all of the premium. Insurance agent "B" presents group term life insurance quote for blanket coverage of $100,000 benefit---meaning not based on age, gender, etc. for same "key" group of employees for considerably less in premiums. Insurance agent "A" says this is discrimination to have a group term life insurance policy that does not cover each and every employee that works for company--Insurance agent "B" says group is clearly defined and there is no discrimination within this defined group. Insurance agent "A" says only way to avoid this discrimination is by having the individual policies. Who is right?

[mroberts]

As long as you can class out the group of employees being offered the group policy, then I don't see any discrimination here. The reason agent "A" is most likely complaining is either because he's losing a decent chunk of commissions or he is not familiar with many of the aspects of group insurance. A lot of agents that sell individual products focus on those rather than group policies since they are more lucrative.

[GBurns]

Agent "A' has a lot of commission at stake on these individual policies and could be biased in his opinion.

I do not see a discrimination issue in any case, however, I see a fiduciary issue and a major tax issue.

Are the individual policies Term or Cash Value insurance?

Assuming that they are Cash Value policies;

Have these "key" employees been made aware that they will be taxed on the "economic" benefit of these policies? Has the employer been advised regarding the possible lack of deduction as an expense these premiums?

Has the employer considered or been advised of the fiduciary liability issues that exist if it is the employer (instead of the employee) who selects other than Term Life insurance for a death benefit oriented plan?

[Guest russo40]

Thanks for your replies, anyone I have talked to agreed with your answers, however, the reasons I "had" to ask was the agent had the shareholders convinced this was a mistake. In answer to the tax questions, basically, yes--we are aware of the tax issues. Again, thanks for you help--I appreciate it!!!