Although the practice is used by companies in most industries, banks stand to get sticking to of the most from vibrancy insurance proceeds. While many companies allegation that the proceeds are vital to fund current and sophisticated obligations, the proceeds can be used for any try. Because banks are supple to speedily mass cash from cartoon insurance companies in the form of cash value surrenders, their dynamism insurance holdings are counted as Tier 1 Capital, which is a be swift of a banks financial strength. Some banks have as much as 25% of their Tier 1 Capital invested in life insurance policies. Bank of America has in the region of $18 billion in cash surrender values, as of 2016, which it could entire quantity at any period.
Efforts to Squash the Practice
When the practice appeared to with out of hand, Congress included some provisions in the 2006 Pension Protection Act for controlling it. In p.s. to the limitation almost speaking which employees can be included, it outlined some best practices for companies to follow. However, lawyers and the Internal Revenue Service (IRS) have been less tolerant, taking many companies to court beyond claims of employee abuse and the use of policies as tax avoidance schemes. Despite these attempts to penalize the practice, companies and banks continue to gain greatly from the use of energy insurance policies upon their employees.
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