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Death benefits, incl. life insurance

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Life Insurance: The Bonus Plan for the Executive Who Has Everything
"Under the executive bonus plan, the employer pays a bonus to the employee so the employee can purchase (and own) a fixed indexed universal life (FIUL) insurance policy. The employee then uses the bonus to pay the entire policy premium directly to the insurance company. Because the employee is the owner of the policy, the employee can access any available cash value accumulation through policy loans and withdrawals." (
Sixth Circuit Declines to Adopt 'Substantial Compliance' Test for Requirements of a Qualified Domestic Relations Order
"[T]he Sixth Circuit determined that a divorce decree suffices as a qualified domestic relations order ('QDRO') that clearly specifies the decedent's daughter as the life insurance beneficiary under ERISA, and it affirmed the district court's order requiring Sun Life to pay the life insurance proceeds to her.... The court illustrated what is meant by 'clearly specified.' " [Sun Life Assurance Co. of Canada v. Jackson, No. 17-3120 (6th Cir. Dec. 13, 2017)] (Roberts Bartolic)
Life Insurance: The Versatile Tool for Retirement Protection (PDF)
10 pages. "Just as human capital faces risk -- mainly premature death and disability -- during a couple's working years, retirees face a number of risks that may negatively impact their financial capital and the resulting income it is expected to produce. These risks include the risk of outliving financial capital, investment risk, healthcare costs, and taxes.... [P]ermanent life insurance can be used to help replace financial capital that is diminished due to the occurrence of each of these risk events during retirement." (Prudential)
Are You Up to Date on Qualified Plan Beneficiary Rules?
"Many different rules impact the administration of paying a deceased participant's benefit to the correct beneficiary. These include knowing your plan document, required minimum distribution (RMD) regulations for beneficiary options, spousal consent issues, properly completed beneficiary designation forms, and having iron-clad procedures for paying beneficiaries. Keeping up to date with these rules can save you time, money and aggravation." (PenChecks)
Text of Ninth Circuit Opinion Attributing Employer's Actions to Insurer in Award of Life Insurance Benefits (PDF)
"Because Providence [as the employer] was acting as MetLife's agent for purposes of collecting, tracking, and identifying inconsistencies with the evidence of insurability requirement, Providence's knowledge and conduct with regard to those matters are attributed to MetLife.... The deductions of premiums, MetLife and Providence's failure to ask for a statement of health over a period of months, and Providence's representation to Salyers that she had $250,000 in coverage were collectively 'so inconsistent with an intent to enforce' the evidence of insurability requirement as to 'induce a reasonable belief that [it had] been relinquished.' " [Salyers v. Metropolitan Life Ins. Co., No. 15-56371 (9th Cir. Sept. 20, 2017)] (U.S. Court of Appeals for the 9th Circuit)
ERISA Preempts State Law Revoking Beneficiary Designation Upon Divorce
"The court determined that the state law at issue here 'related to' an ERISA plan in that it required the plan administrator to look to state law to determine the recipient of plan payments, rather than to the plan itself. The court concluded that the state law implicates an area of core ERISA concern by abrogating ERISA's requirements that a plan must specify the basis on which payments are to be made, and that plan fiduciaries must make payments to beneficiaries designated by participants or by the terms of the plan." [Jackson v. Parks, No. 17-14 (D. Mont. Sept. 14, 2017)] (Thomson Reuters / EBIA)
Who Is Entitled to Death or Survivor Benefits from an ERISA Plan or from a Federal Employee Benefit Plan?
"Designations may be effective even if there are ambiguities about the benefit shares of each beneficiary and/or the form of payment. An effective designation must be authenticated ... The signature may not need to be the participant's name or even be legible. The federal (Phoenix) substantial compliance doctrine ... creates benefit entitlements enforceable against the plan. The Amara equitable relief principles ... principles may create benefit entitlements enforceable against the plan administrators using those unauthorized procedures or forms." (Albert Feuer, via SSRN)
[Official Guidance] Text of IRS Form 8925: Report of Employer-Owned Life Insurance Contracts (PDF)
Rev. Sept. 2017. "Use Form 8925 to report the number of employees covered by employer-owned life insurance contracts issued after August 17, 2006, and the total amount of employer-owned life insurance in force on those employees at the end of the tax year. Policyholders must also indicate whether a valid consent has been received from each covered employee, and the number of covered employees for which a valid consent has not been received." (Internal Revenue Service [IRS])
Employers Pull Back on Popular Life Insurance Benefits
"As many as 108 million Americans have life insurance coverage through the workplace, compared with 102 million covered by individual life insurance ... It is the first time that more people are covered by workplace life insurance than by individual policies since LIMRA began tracking data in 1960, LIMRA researchers said.... Meanwhile, companies are cutting back on group life as rising health care costs erode budget allocations for other benefits, Potter said. Another reason for the retreat is that employers do not think their employees value this benefit, which analysts say is a misread." (
Less Than Half of Employed Americans Have Workplace Group Life Insurance
"Less than half of employed Americans (45 percent) have voluntary group life insurance provided by their employer. Among those who don't have voluntary group insurance provided by their employer, only a small percentage (9 percent) said they had other obligations or did not see the value in it (14 percent)." (OneAmerica)
For the First Time, More Americans Are Covered by Employment-Based Life Insurance Than by Individual Life Insurance
"108 million Americans have life insurance coverage through their workplace, compared with 102 million covered by individual life insurance.... Over the past 50 years the number of Americans covered by employment-based life insurance has increased significantly (nine million in the past six years alone) ... The number of households covered by employment-based life has increased by 68 percent (to 57 million), while the number of people (adults and children) covered has almost doubled (from 55 million to 108 million)." (LIMRA)
[Discussion] Can a Dependent Life Insurance Policy Pay Death Benefits to a Beneficiary Other Than the Employee?
"Is there any legal requirement that an employee must be the beneficiary on a dependent life insurance policy? I see this in many policies and I'm not sure why this is the case. I have a situation where an employee designated his children as beneficiaries on the policy on his spouse's life. The employee made this designation on the dependent life insurance enrollment form provided by the insurer. The insurer did not object to the designation when originally made. Unfortunately, the employee's spouse passed away recently and the insurer is now saying it will not pay the children because the policy language requires the proceeds to be paid to the employee." (BenefitsLink Message Boards)
A Manslaughter Conviction May Not Prevent Receipt of ERISA Life Insurance Benefits
"Many states have enacted slayer rules to prevent murderers from inheriting from their victims, including life insurance policy proceeds. A recent case out of New York ... considered a novel question about whether or not a second-degree vehicular manslaughter conviction necessarily prevents a beneficiary from receiving life insurance proceeds. The court found that it does not." [Prudential Ins. Co. of Am. v. Govel, No. 16-297 (N.D.N.Y. June 6, 2017] (Roberts Bartolic)
Court Supports Plans' Freedom to Craft Own Process for Beneficiary Designations
"The problem with the doctrine of substantial compliance is that it undermines the preference for straightforward administrative rules favored by the Supreme Court ... because it leaves the lower court to decide issues such as what level of compliance is 'good enough' to express the plan participant's intent to change a beneficiary.... [One recent case] stated that under the federal common law equitable doctrine of substantial compliance developed in the absence of specific ERISA statutory provisions on beneficiaries, a beneficiary designation should be honored if there is evidence that a participant intended to make a change and the participant takes action similar to the action required by the plan." [Ruiz v. Publix Super Markets, Inc., No. 17-135 (M.D. Fla. March 30, 2017)] (
Court Faults Employer for Failing to Provide Accurate Information Regarding Life Insurance Conversion
"The judge faulted WellStar for not understanding its life insurance policy and incorrectly assuming that its former employee was still covered.... The court considered the fact that WellStar did not follow its own written procedures in determining it had breached its duty to the plaintiff." [Erwood v. Life Ins. Co. of North America and Wellstar Health System, Inc. Group Life Ins. Program, No. 14-1284 (W.D. Penn. Apr. 13, 2017)] (Vorys, Sater, Seymour and Pease LLP)
Second Circuit Upholds Dismissal of ERISA Claims Against Plan Defendants for Alleged 'Cross-Subsidization' Scheme
"[P]laintiffs alleged that Family Dollar negotiated a discount on the basic life insurance premium it paid, and that the Hartford offset some of this discount by increasing the supplemental life insurance premium charged to the employees who purchased supplemental coverage.... The Court determined that Family Dollar used plaintiffs' premiums for the sole purpose of covering insurance costs under the Plan, and that its use of cost-reduction strategies to minimize its cost of providing employees with basic and supplemental life insurance did not constitute a transfer for its own benefit or self-dealing in its own interest." [Hannan v. Hartford Financial Services, Inc., No. 16-1316 (2d Cir. Apr. 25, 2017)] (Robinson & Cole LLP)
Plan Administrator's Failure to Notify Beneficiary of Life Insurance Conversion Rights Was Breach of Fiduciary Duty
"The Court found that that LINA had provided an Administrative Services Manual to WellStar that explained the conversion process, and stated that WellStar was required to give notice of conversion rights. However, WellStar did not have a process for giving that notice, and did not give it to plaintiff or her husband.... [The Court imposed a surcharge of] $750,000, the amount of coverage lost by their failure to convert." [Erwood v. Life Ins. Co. of North America and Wellstar Health System, Inc. Group Life Ins. Program, No. 14-1284 (W.D. Penn. Apr. 13, 2017)] (Robinson & Cole LLP)
Employer Liable for Failing to Provide Life Insurance Conversion Information to Disabled Employee
"Notwithstanding that the right to convert to an individual insurance policy had long since expired, the court crafted a remedy under ERISA that imposed a surcharge on the employer equal to the $750,000 in life insurance that the physician employee would have elected to convert to an individual policy but for the plan administrator's breach of its fiduciary duty; the court also awarded the physician's spouse interest, legal fees and costs associated with bringing the lawsuit. Because the ability to convert to an individual policy was no longer available, the employer, and not the insurance company, is obligated to make all of these payments." [Erwood v. Life Insurance Company of North America and Wellstar Health System, Inc. Group Life Insurance Program, No. 14-1284 (W.D. Penn. Apr. 13, 2017)] (Buchanan Ingersoll & Rooney PC)
Avoid Costly Litigation Over Beneficiary Designations
"Language in plan documents, employee communications, and Summary Plan Descriptions should be clear and consistent. Plan administrators may also want to regularly (i.e. annually) remind participants on how to update their beneficiaries in light of life-changing events and provide them with the necessary beneficiary designation forms to do so." (Butterfield Schechter LLP)
Avoiding Beneficiary Befuddlement
"The 11th Circuit decision should be helpful to plan administrators ... [who] may wish to consider some of the following practices and additions to plan language in anticipation of these situations: [1] Giving frequent written reminders to participants about their beneficiary designations; [2] Resoliciting updated beneficiary designations from participants on a periodic basis; [3] Adopting a rule providing for the revocation of spousal designations upon divorce; [4] Adopting a rule specifying a presumption of survival in the event of the simultaneous death of a participant and beneficiary; [5] Adopting a rule that voids a beneficiary designation naming a person who is convicted of the murder of the participant." [Ruiz v. Publix Super Markets, Inc., No. 16-735 (M.D. Fla. Mar. 30, 2017)] (Benefits Bryan Cave)
How to Avoid Costly Beneficiary Designation Litigation: Helpful Hints for All Benefit Plans
"When there is a beneficiary dispute, the plan's written terms must be followed, to save the plan and its sponsor from costly litigation, avoid double liability, eliminate the need to examine and evaluate extrinsic documents to discern an employee's intent, and to make sure that benefits are paid quickly. Using the Supreme Court opinion as a guide, [a recent district court] opinion thus concluded that it does not matter if a participant 'substantially complies' with designation procedures. Instead, a designation will not be changed unless the plan's specific requirements are precisely followed." [Ruiz v. Publix Super Markets, Inc., No. 16-735 (M.D. Fla. Mar. 30, 2017)] (Foley & Lardner LLP)
Are Your 'Voluntary' Benefit Plans Subject to ERISA?
"[T]here are four requirements of the voluntary plan safe harbor.... The benefit plan must be completely voluntary and employee paid, with no employer contributions made in any form for any employees.... [T]he employer must not endorse the plan. In simple terms if you endorse it, you own it (for purposes of ERISA) ... Finally, under the safe harbor, employers are prohibited from receiving any compensation that exceeds reasonable reimbursement for collecting and remitting premium payments." (Graydon Head & Ritchey LLP)
Avoid Disaster When Designating Beneficiaries on Your Retirement Plan
"What happens if there is no beneficiary designation or the named beneficiary or beneficiaries predeceased the account owner? ... What else can go wrong ... Beneficiary designations are incomplete ... Beneficiary designations name an obsolete beneficiary ... Beneficiary designations aren't thought through.... While any beneficiary has the option of taking the entire account balance immediately, doing so means lumping the income in one year which can result in paying tax at higher marginal rates, and foregoing the benefits of stretch-out. [Certain options] provide the opportunity to avoid or minimize unfortunate results[.]" (Moss Adams)
Tax Implications for Non-Discriminatory Employer-Paid Life Insurance Coverage That Exceeds $50,000 (PDF)
"Your employees may have to pay taxes on the value of the following types of employer-sponsored group term life insurance: [1] Employer-paid group term life benefits that exceed $50,000; [2] Discriminatory employer-paid term life plans; [3] Employer-sponsored voluntary life coverage; [4] Employer-sponsored voluntary life insurance paid for with pre-tax dollars under a Section 125 plan. This [article] clarifies the key Section 79 areas to review at the end of each calendar year [and] details potential tax consequences for each situation." (Marsh & McLennan Agency LLC)
Evidence of Insurability Requirement Does Not Bar Beneficiary's Life Insurance Claim; Premium Payments Sufficient to Establish Coverage Amount
"The Sixth Circuit has upheld a beneficiary's right to benefits under an employer's group-term life insurance plan after the insurer denied those benefits because the deceased employee failed to submit evidence of insurability.... Equating the term 'elected' with being 'covered,' the court opined, was an impermissible modification of the policy, not an interpretation ... [T]he court concluded that the increased withholding from the employee's pay was sufficient evidence of the employee's request for increased coverage[.]" [Brown, III v. United of Omaha Life Ins. Co., No. 15-4293 (6th Cir. Sept. 14, 2016)] (Thomson Reuters / EBIA)
Allstate Can't Nix Retiree Lawsuit Over Lifetime Benefits
"The retirees sufficiently alleged that Allstate violated [ERISA] by failing to provide life insurance at no cost for the rest of their lives, Watkins said. In addition, the retirees adequately alleged that Allstate breached its fiduciary duties by failing to communicate truthfully about the terms of the company's employee group life insurance plan." [Turner v. Allstate Ins. Co., No. 13-00685 (M.D. Ala. Sept. 27, 2016; additional injunctive relief granted to plaintiffs)] (Bloomberg BNA)
Court Finds Employer, Not Group Life Insurer, Liable for $314,000 Death Benefit
"The court ultimately ruled in favor of the plaintiffs, finding that the employer had breached its fiduciary duty by administering the plan in a way that allowed the employee to believe incorrectly that a certain level of life insurance coverage was in place. As a result, the court ordered the employer, and not the insurer, to pay $314,000, the amount of the supplemental coverage." [Van Loo v. Cajun Operating Co. dba Church's Chicken, No. 14-10604 (E.D. Mich June 6, 2016)] (The Wagner Law Group)
The Implications of Carrying Higher Housing Debt Into Retirement (PDF)
"While it may have been true that earlier generations of retirees did not have a widespread need to carry life insurance protection in retirement, the coming generations of retirees will have this need due to the amount of debt they are choosing to carry into their retirement years and the loss of income resulting from the death of a spouse." (Prudential)
Employer Who Self-Administered Life Insurance Plan Held Liable for Coverage Provided in Error
"The employee ... increased supplemental coverage over the years beyond the level at which coverage was available without evidence of insurability [EOI]. However, the employee was never sent the EOI form and the EOI form was never completed.... The court found that the employer breached its fiduciary duty by administering the plan in a way that allowed the employee to believe incorrectly that coverage was in place, particularly when the employee had paid premiums for the coverage for a number of years.... The employer will have to pay ... $314,000." [Van Loo v. Cajun Operating Co. dba Church's Chicken, No. 14-10604 (E.D. Mich June 6, 2016)] (Stinson Leonard Street)
Court Nixes Class Action Suit Alleging Fiduciary Breach for Supplemental Life Pricing
"A federal district court in Connecticut has dismissed a class action suit ... [which] alleged the employer negotiated a discount on the company-paid basic life insurance by increasing the rates charged employees who purchase supplemental coverage. The plaintiffs alleged this 'cross subsidization and kickback scheme' was a violation of the insurer's and the employer's fiduciary duties.... The plaintiffs have filed an appeal with the U.S. Court of Appeals for the Second Circuit, which has not yet indicated whether it will hear the case." [Hannan v. The Hartford Financial Services, Inc., No. 15-395 (D. Conn. Mar. 29, 2016)] (Lockton)
Plan Administrator Must Pay Over $300,000 for Misrepresenting Level of Life Insurance Coverage
"[T]he beneficiaries pointed out that not only did the employer fail to send an [evidence of insurability form (EIF)] when the employee first elected coverage above the guaranteed-issue threshold, it also indicated (via its enrollment system) that her enrollment was complete and accepted premiums for the elected coverage for five years -- despite the lack of an EIF. The premium amount for the elected coverage was also specified in a letter the plan administrator sent when the employee stopped working due to illness. According to the beneficiaries, these actions amounted to a representation that the elected coverage was in effect[.]" [Loo v. Cajun Operating Co. d/b/a Church's Chicken, No. 14-10604 (E.D. Mich. June 6, 2016)] (Thomson Reuters / EBIA)
Fiduciary Liable Under ERISA For Denied Life Insurance Coverage
"This case illustrates how an employer can end up paying a high price for assuming that an insurance company will take responsibility for providing necessary information to its employees. In this instance, the group life carrier denied coverage for additional benefits due to failure to supply an 'evidence of insurability' form for the increased coverage. The Court was not impressed with the employer's attempt to shift blame[.]" [Loo v. Cajun Operating Co. d/b/a Church's Chicken, No. 14-CV-10604 (E.D. Mich. June 6, 2016)] (Health Plan Law)
Many Employers Want Guidance From Financial Advisors About Voluntary Benefit Options
"Two of five employers that currently do not rely on guidance from a financial advisor say they would welcome such help with voluntary benefit options such as retirement plans, life and disability insurance, and other protection benefits ... Firms that would characterize such assistance as 'extremely' or 'very' valuable range from 33 percent for those with fewer than 25 employees to 55 percent for those with 1,000 or more employees ... The percentages of employers that would see such advice as at least 'somewhat' or more valuable range from 75 percent for the smallest employers to 80 percent for larger firms[.]" (MassMutual)
Basic-Supplemental Life Insurance Plan Pricing Structure Upheld in ERISA Class Action
"An employee benefit plan that includes an alleged subsidization component for its basic and supplemental options is neither prohibited by [ERISA] nor a violation of the plan sponsor or service provider's fiduciary duties ... Plaintiffs [had] alleged that the Insurer and the Company engaged in a 'cross-subsidization scheme' to overcharge plaintiffs for supplemental life insurance that was higher than called for by the underwriting and actuarial pricing experience for the purpose of lowering the price that the Company incurred for 'non-contributory' basic group life insurance coverage." [Hannan v. Hartford Financial Serv. Inc., No. 3:15-cv-0395 (D. Conn. Mar. 29, 2016)] (Sutherland Asbill & Brennan LLP)
Life Insurance and Retirement Plan Benefits: Are Your Clients Achieving Their Intended Goals?
"Individuals may not rely on many of the traditional rules of construction for probate asset dispositions to conform their designations to their intended goals, particularly as those goals change. This is particularly the case for benefits from ERISA plans ... [It] is advisable for an individual to ... consider beneficiary designations in the context of the disposition of his or her other assets ... [and] consider the extent, if any, it is advisable to make his or her estate or a trust the plan beneficiary in order to provide the desired beneficiaries with the desired benefits, if a plan's designation terms do not permit the desired choices to be made directly." (Albert Feuer, via SSRN)
Planning for the Dementia Factor in Retirement: Options to Consider If an IRA Beneficiary May Develop a Mental Disability
"John wants to name his wife Susan as the primary beneficiary of his IRA and to name their children as contingent beneficiaries. The expectation is that, upon John's death, Susan, as surviving spouse-beneficiary, would roll the IRA over into her own IRA, and name the children as beneficiaries of the rollover IRA. But both spouses are concerned that following John's death Susan might have dementia, and not be legally competent to roll over the inherited IRA or file a new beneficiary designation. Is there a way that Susan can, now, prior to John's death, pre-elect the spousal rollover and name the children as beneficiaries of her (not yet created) rollover IRA? If that cannot be done, can John at least designate that benefits still in his IRA after Susan's death will pass to their children?" (Natalie Choate, in Morningstar Advisor)
Interpleader Can Prevent Overpaying for Death Benefits
"If two or more parties are claiming to be the rightful beneficiary of a deceased participant's benefit, one option is to review all the facts and make a determination applying the plan's terms through its claims procedures. The risk of this approach is that if the administrator makes a decision that is overturned on review by a court, the plan could end up paying twice. A second option is for plan administrators to preemptively file an interpleader action. A plan can file an interpleader action as a plaintiff in a case, name the disputing beneficiaries as defendants, and then tender the benefit to the court and let the court resolve who is the rightful owner. A recent case illustrates how choosing between these forums can mean drastic differences in determining who receives the benefit." [Jenkins-Dyer v. Drayton, No. 2:13-CV-02489-JAR (D. Kan. Sept. 25, 2015)] (HR Daily Advisor)
State Law Claims Under Group Life Insurance Policy Were Preempted by ERISA
"On ERISA preemption grounds, a federal court has ruled against state law claims asserted by the beneficiary of a former school teacher who sought benefits from a group life insurance policy.... [A recent case] illustrates how a governmental employee's life insurance benefits may fall within the scope of ERISA when sponsored by a non-governmental 'employee organization' and be subject to the full weight of ERISA." [Woods v. American United Life Ins. Company, No. 1:15-cv-859 (N.D. Ala. Nov. 13, 2015)] (Williams Mullen)
[Guidance Overview] Tax Implications for Non-Discriminatory Employer-Paid Life Insurance Coverage That Exceeds $50,000 (PDF)
"Your employees may have to pay taxes on the value of the following types of employer-sponsored group term life insurance: [1] Employer-paid group term life benefits that exceed $50,000; [2] Discriminatory employer-paid term life plans; [3] Employer-sponsored voluntary life coverage; [and] [4] Employer-sponsored voluntary life insurance paid for with pre-tax dollars under a Section 125 plan. This [article] clarifies the key Section 79 areas to review at the end of each calendar year. Each section details potential tax consequences ... [and] how to calculate tax liability." (Marsh & McLennan Agency LLC)
Death and Employee Benefits: How to Prepare for the Worst
"Ensure your life insurance is adequate and your beneficiary designations are up to date. Understand what benefits coverage you and your spouse have through your employers, and read your employee benefit booklets. Record policy numbers and important contact information (such as your employers' HR departments) and store them in a logical place that your partner knows about -- not on your password-protected cell phone. If you have a safety deposit box that isn't jointly held with your spouse, don't forget about that, either." (Buck Consultants)
[Guidance Overview] After-Tax Purchases of Optional Group Term Life Insurance Avoid Imputed Income
"Even when premiums are paid entirely by employees with after-tax dollars, optional life insurance can result in imputed income if the insurance is treated as provided under a policy carried by the employer. This may happen if the after-tax coverage is sold in conjunction with other coverage that is employer-paid. But it may also happen for separate coverage if the employer arranges for payment of the premiums by employees, and those rates 'straddle' the Table I rates -- that is, the rate for at least one employee is lower than the Table I rate and the rate for at least one other employee is higher than the Table I rate. Here the employer avoided aggregation of its basic and optional policies, and avoided imputed income on the optional policies because there was no straddle: all of the rates were less than or equal to the Table I rates." [PLR 201542003 (Oct. 16, 2015)] (Thomson Reuters / EBIA)
Improving Retirement Preparedness for the Next Generation (PDF)
"An inheritance or a life insurance death benefit can make a meaningful difference in closing the gap between being unprepared and being prepared for retirement. The median shortfall for lower income households at risk today is $56,986 and is projected to be $131,283 (in today's dollars) when the head of the household turns age 65. For middle income households, the median shortfall is $87,489 today and is projected to be $197,385 (in today's dollars) when the head of the household turns age 65. Closing all or even a portion of those gaps through the death benefit from life insurance may be an economically feasible option for many families." (Prudential)
Individual Absent Due to Illness on Effective Date of Life Insurance Policy Was 'Actively Employed' on That Date, Says California Court
"The phrase 'actively at work' in a supplemental life insurance policy refers to the employment status of an employee not the employment activities of a covered worker on any given day, a state appeals court in California has ruled.... 'The policy is ambiguous regarding whether [the employee] needed to perform his work responsibilities on New Years' Day or anytime after that in order for his wife to receive benefits ... We therefore interpret the policy in favor of [the employee's] reasonable expectations, which are that he should not have to work on New Year's Day or when he is sick in order to receive coverage that he has paid for,' the court said." [Sequeira v. Lincoln National Life Ins. Co., No. A139639 (Cal. Ct. App. Aug. 31, 2015)] (
Voluntary Benefits: Filling the Deductible Gap in the ACA Landscape
"Offering a comprehensive suite of voluntary benefits can be a cost-effective way to ease the financial burden and ... [provide] an expanded 'safety net' of coverage for individuals and their families. Voluntary benefit products such as critical illness, hospital indemnity and whole life... allow employees to protect themselves and their families in time of need, helping them to cover expenses that may extend beyond the scope of their standard health plan." (Benefitfocus)
Are Group Life Insurance Plans Worth the Risk of Litigation After Cigna Corp. v. Amara?
"While there are fiduciary liability risks associated with the administration of any kind of plan, surcharge claims under life insurance plans seem to provide a particularly tempting variety of low-hanging fruit for the ERISA plaintiffs' bar. First, there is often a substantial -- and relatively undisputed -- amount of money at issue.... Second, life insurance policies are often complex documents, particularly when it comes to conversion provisions." (Jackson Lewis P.C.)
Some Federal Employee Life Insurance Rates to Rise; Others to See Decrease
"On the heels of an immediate premium hike in the long-term care insurance program for federal employees, some rates are going to increase in 2016 in their much more widely used life insurance program -- although others will hold steady and still others will decrease ... For the retiree basic coverage, premiums will rise upwards of 10 percent. The picture is mixed for the additional forms of insurance, though, generally with decreases at younger ages but increases at older ages." (The Washington Post; subscription may be required)
What Communications Do Employees Value Most When Selecting Their Benefits?
" 'Not surprisingly, more than 8 in 10 employees focus on the cost information,' said Kim Landry, insurance research analyst at LIMRA. 'In addition, 72 percent of employees will look at a detailed benefit plan description when one is available.' In terms of how they want to learn about benefit options, employees are most likely to use printed materials at work (83 percent) or home (76 percent). Accessing the information online (70 percent) and by email (61 percent) were used slightly less often." (LIMRA)
[Opinion] ACLI Comments to DOL on Proposed Fiduciary Regs and Prohibited Transaction Exemptions, and Regulatory Impact Analysis (PDF)
326 pages. "It is essential that revisions be made to the Proposal to: [1] Ensure that providers, plan sponsors, plan fiduciaries, and IRA owners retain the freedom to define the nature and scope of their relationship.... [2] Preserve reasonable and customary commission-based practices ... [3] Be protective of the interests of savers and retirees through a workable rule that ... supports and encourages key educational activities when interests align. [4] Encourage access to a savings plan at work and provide the opportunity to learn about and access annuities, the sole means available in the market place by which retirees can secure income for life. [5] Ensure access to important workplace benefits such as life, disability income, long-term care, and other non-medical insurance products.... [6] Base the cost-benefit analysis on a careful examination of the impact of the rule on the availability of annuities and workplace benefit insurance products." (American Council of Life Insurers [ACLI])
Improving Employees' Life and Disability Insurance Benefit Decisions: Results of an Employer Survey
"[V]ery little is known about how individuals select their insurance benefits packages, if their selections are optimal for their circumstances, or what employers can do to encourage them to select the optimal benefit package.... Survey results are used to describe the landscape of employer practices with respect to supplementary life and disability insurance and to investigate correlations between employer practices (such as cross-advertising group benefits with health insurance) and employee take-up." (Center for Retirement Research at Boston College)
How Do People Decide on Life Insurance and Long-Term Disability Insurance Coverage?
"[U]nlike in the pension world, very little is known about how individuals select their benefits packages, if their selections are optimal for their situations, or what employers can do to encourage the optimal benefit package selection. In this changing benefit landscape, it is important to determine three things: [1] What are current employer practices and their resulting take-up and coverage patterns? [2] Which practices influence employees' selections? and [3] What can employers do to make the employees' selections closer to the employees' optimal choices?" (Center for Retirement Research at Boston College)
Are Employee Benefits for Public School Teachers Governed by ERISA? Yes!
"When you see a claim for disability or life insurance benefits by a public school teacher, you might assume the claim is not governed by ERISA because of the governmental plan exception. But don't stop there. You need to see how the benefit was set up. If the benefit was funded through a union plan, ERISA might apply." [Wilson v. Provident Life and Accident, No.  C14-1479RSL (W.D. Wash. April 29, 2015)] (Lane Powell PC)
Participant's Estate Fails to Show a Claim For Failure to Give Notice of Right to Continue Life Insurance Coverage
"[A federal district court] dismissed the claim by the estate of an ERISA group life insurance plan participant for a fiduciary's alleged failure to give timely notice of the right to continue the benefits after termination of the participant's employment.... The Court acknowledged that such a duty could still arise if the insurance policy itself required such notice.... However, the Estate had not alleged that the plan documents governing Moceri's life insurance coverage included such a requirement, and the Court itself could not find one upon its own inspection of the policy." [Estate of Moceri v. Ratner Companies, No. 2:14-cv-579-FtM-29CM (M.D. Fla. April 7, 2015)] (Williams Mullen)
Failure to Establish Clear Beneficiary Designation Procedures Forces Retirement Plans Into Avoidable Litigation
"Both retirement plans contained language requiring participants to designate beneficiaries, but neither required a written, signed document for unmarried participants.... [T]he Ninth Circuit ... instructed the district court to review the parties' entitlement to the benefits de novo ... suggesting that absent a plan-mandated requirement that beneficiary designations be written instruments signed by the participant, the court could reasonably award the benefits to the son.... With some changes to the plans' governing documents, this situation could have been avoided. " [Becker (plaintiff in interpleader) and Mays-Williams v. Williams, No. 13-35069 (9th Cir. Jan. 28, 2015)] (Troutman Sanders)
Matrimonial Attorneys Should Follow the Bouncing Ball of Beneficiary Designations (PDF)
10 pages. "The point of this article ... is to identify ... the risks and potentially disastrous consequences of a failure to attend to beneficiary designations ... The issues here are exacerbated by the fact that, by the time [they] become apparent, the participant is generally, by hypothesis, deceased and therefore not present or otherwise able to correct the situation....This Article will review the Court's approach in [Kennedy v. DuPont Sav. and Inv. Plan], consider the potential reach and breadth of the issue and discuss the approach taken in various post-Kennedy cases.... [S]imple but critical steps relating to identifying the intent of the parties and conforming the applicable beneficiary designations to that intent will be identified." (Andrew L. Oringer and Albert Feuer, via Tax Management Compensation Planning Journal)
Death Benefit-Only Plans (PDF)
"Death benefit only plans may make sense for employers looking to attract and retain younger talent whose commitment to the company is untested, as key employee carve-outs from group-term life insurance programs, or as an alternative to split-dollar life insurance plans where premium or economic benefit costs to the employee may not make economic sense. The employee should not be subject to income tax on the value of the current life insurance protection and, with proper structuring, should not incur estate taxes on the death benefit paid to his or her beneficiaries (although they will pay income tax on those benefits)." (Fulcrum Partners LLC)
Panel Proposes Rules for Unclaimed Insurance Policies and Annuities
"Insurance companies will be allowed to keep funds in unclaimed insurance policies and annuities for three years, under uniform rules being drafted by [Committee to Revise the Uniform Unclaimed Property Act of the Uniform Law Commission (ULC)]. However, they will be required to use the Social Security Death Master File (DMF) or a similar database.... The draft rules will include a dormancy period of three years running from the date of notice of death, unless the insurance company is unable to confirm the death[.]" (
Nonqualified Plan Beneficiary Was Not Determined by Terms of Qualified Plan
"A decision from the 9th U.S. Circuit Court of Appeals confirms a lower court ruling that a retirement plan membership letter and beneficiary designation form for a nonqualified plan 'did not clearly and unequivocally incorporate by reference the entirety' of the terms of a plan sponsor's qualified retirement plan. For this reason, the terms of the qualified plan cannot determine a beneficiary under the nonqualified plan, the court ruled." [E & J Gallo Winery v. Rogers, No. 13-55327 (9th Cir. Feb. 23, 2015; unpublished)] (PLANSPONSOR)
Ninth Circuit Concludes Beneficiary Designation Form Not a Plan Document
"Other Ninth Circuit opinions faced with sorting governing plan documents from other documents have relied upon Amara for guidance.... Here, the Ninth Circuit appears to have applied a broader definition of 'plan document' to include summary plan descriptions and trust agreements, but nonetheless concluded that the definition did not go so far as to include a beneficiary form." [Becker (plaintiff in interpleader) and Mays-Williams v. Williams, No. 13-35069 (9th Cir. Jan. 28, 2015)] (Seyfarth Shaw LLP)
EBSA Investigation Returns $39.8M to More Than 400 Benefit Plans Nationwide
"After nearly six years of litigation, a federal district court in Philadelphia recently entered a $39.8 million judgment, protecting the rights of workers who participated in more than 400 death benefit plans ... The defendants are permanently barred from serving as fiduciaries to any employee benefit plan and ... must make restitution to the plans.... The plans primarily provided death benefits to participants nationwide and were established in connection with [the] Regional Employers' Assurance Leagues Voluntary Employees' Beneficiary Association and Single Employer Welfare Benefit Plan." (Employee Benefits Security Administration [EBSA])
Risk Considerations for Funding U.S. Group Life and Disability Insurance Programs through Captives (PDF)
"Large employers that sponsor group term life or long-term disability (LTD) programs may be motivated to enter into captive insurance arrangements to fund these benefits. Doing so offers potential reductions in costs, greater control over invested assets, and possible tax savings... This article presents an overview of the evolving captive insurance market for large benefit plan sponsors and discusses some of the more significant risks that employers contemplating these funding arrangements should consider." (Milliman)

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