Whether You Call It ‘Dead Peasant’ Or ‘Key Man’ Insurance, Union Says ‘No’
Reps. Jeffrey Berger and Tim Larson have been targeted by a state employee labor union for pointing to Detroit’s economic situation to support a plan to take out life insurance policies on state employees.
The two Democrats penned an editorial published Wednesday in the Waterbury Republican American, citing Detroit’s underfunded employee pension program as a major factor in its recent bankruptcy filing.
Although Connecticut is in better shape than Detroit when it comes to paying for its pension obligations, Berger and Larson said it lacks a funding mechanism for some of its retiree benefit programs.
They recommend passing legislation allowing the state to take out life insurance policies on current and former state workers, a practice they say could earn the state millions in survivor benefits.
In their editorial, Larson and Berger said the practice is frequently employed by businesses and is referred to as “Key Man” insurance.
In a Friday email to its members, AFSCME Council 4 had another term for the policy: “Dead Peasant” insurance.
The union’s message said that Berger and Larson “have been promoting the concept of the state buying ‘dead peasant’ insurance policies on the lives of state employees so the state makes money when their employees die. Not only is this bad fiscal policy, it’s morally bankrupt.”
Larry Dorman, a spokesman for AFSCME Council 4, said it was “disingenuous” to use Detroit’s situation to further a policy which the lawmakers have unsuccessfully promoted in the past. They proposed a bill in the recently concluded legislative session but it was never raised for a public hearing by the Insurance Committee.
“They’re misreading the situation to advance legislation that has no business ever seeing the light of day,” he said, adding that Detroit was not heading toward bankruptcy “simply because its workers have pensions.”
In a Friday phone interview, Berger said he was “blindsided” by the union’s email, which he said was unfair. He said the proposal was an attempt to help state workers by ensuring the solvency of the pension and health care benefits.
Berger said referring to the proposal as “dead peasant” insurance policies was disingenuous. He said even if the state were to approve the practice, individual workers and retirees would need to approve of an insurance policy before the state took one out.
“There’s nothing being done behind the scenes or in the dark on this. It would have to be signed off on by the employee or the retiree,” he said.
Though Berger maintains that Connecticut could be headed down the same road as Detroit when it comes to its employee pensions, Dorman disagrees. He said the state has taken steps in recent years to shore up its funds.
“The bottom line is Berger and Larson have incorrectly diagnosed a problem and offered an absolutely incorrect solution,” Dorman said.