Rita Atkinson was an hourly Walmart employee. When she died in 1996, Walmart received $66,048.70 from a life-insurance policy the company had purchased on her.
Karen Armatrout was another hourly Walmart employee. She died the following year. Walmart received $72,820.30 from the policy covering her life.
Their beneficiaries received smaller employee benefits under the policies. Walmart received the remainder.
Those cases were not isolated. Between 1993 and 1995, Walmart purchased corporate-owned life insurance policies covering roughly 350,000 employees, according to court records.
The arrangement sounds like a relic of a particularly strange period of 1990s corporate tax planning.
It isn’t entirely.
Companies can still own life-insurance policies on employees, pay the premiums and collect money when those employees die. Corporate-owned life insurance, usually called COLI, remains legal and widely used.
What changed is the legal and tax framework around it.
And this is where many explanations become misleading.
Congress did not simply “ban dead peasant insurance” in 2006. Federal law generally requires advance notice and written employee consent for an employer to receive the broad federal income-tax exclusion available under modern employer-owned life insurance rules. But whether a policy can legally be issued in the first place is also governed by state insurance law.
Those are different questions.
In some states, the rules are highly restrictive. In others, an employer can under certain circumstances obtain employer-owned insurance without the employee’s consent.
So the real answer to “Can my employer take out life insurance on me?” is:
Potentially, yes. But whether your employer can do it, whether it must tell you, and how the death benefit is taxed can depend on several different laws.
Editor’s note: This article was prompted by a video from Ashley B (@ashleytheebarroness) discussing Walmart’s historical use of corporate-owned life insurance on rank-and-file employees. sherafy.com independently reviewed the underlying court records, federal tax law, IRS guidance and current state insurance statutes.
Yes, Walmart really did insure hundreds of thousands of workers
Walmart began its corporate-owned life insurance program in 1993.
Employees enrolled in Walmart’s health plan were included unless they opted out. Walmart paid the premiums and other costs. Court records say employees were notified of the program and given an opportunity to decline participation.
From December 1993 through July 1995, Walmart purchased more than 350,000 policies.
The scale was enormous.
A Delaware court later described an initial purchase of more than 20,000 policies from Hartford and nearly 200,000 from AIG, involving initial premium payments exceeding $800 million. Walmart later bought approximately another 135,000 policies with roughly $300 million in additional initial premiums.
Employees did not pay for the coverage.
For certain employees, the policies provided a $5,000 or $10,000 benefit to their beneficiaries. Walmart received the remaining insurance proceeds.
That is what happened with Rita Atkinson and Karen Armatrout. Both were hourly, rank-and-file employees. Neither had opted out.
After Atkinson died, Walmart received $66,048.70. After Armatrout died, Walmart received $72,820.30.
The central story circulating online is therefore real.
The legal and financial mechanics behind it, however, matter.
Why would Walmart insure a cashier or hourly worker?
Traditional “key person” insurance is easy to understand.
A company might insure its founder, CEO or another person whose unexpected death could create a major financial loss. The company pays the premium, the executive dies, and the insurance helps compensate the business for the disruption.
Broad-based COLI extended the concept to much larger groups of workers.
The important point is that the financial value of those programs was not limited to collecting a death benefit when an employee died.
Permanent life-insurance policies can accumulate cash value, which appears as an asset to the policy owner. Historically, companies also borrowed against those policies.
Some of the most aggressive broad-based COLI programs paired those loans with deductions for interest expenses, creating substantial tax benefits.
Walmart’s program was explicitly structured around these economics. Delaware court records describe a plan in which insurers made policy loans that helped fund premiums while Walmart deducted interest payments for federal income-tax purposes.
One federal court found that Walmart’s policies saved the company more than $36 million in tax payments in 1994 alone.
So the answer to “Why insure hundreds of thousands of ordinary workers?” is more complicated than simply “because the company got a check when someone died.”
The lives being insured were also part of a much larger financial and tax structure.
What is “dead peasant insurance”?
“Dead peasant insurance” is not the legal name for the product.
The formal terms are generally corporate-owned life insurance (COLI) or employer-owned life insurance (EOLI). Banks frequently use the related term bank-owned life insurance (BOLI).
“Dead peasant insurance” and “janitor insurance” became pejorative descriptions of broad-based programs that insured rank-and-file employees rather than a small number of genuinely critical executives.
That distinction matters.
Not every COLI policy is a Walmart-style policy on an hourly worker.
The National Association of Insurance Commissioners’ Guidelines on Corporate Owned Life Insurance describe several business uses, including key-person protection, stock-redemption agreements, deferred-compensation arrangements and funding certain employee-benefit liabilities.
A policy covering a company’s founder and a program insuring 350,000 supermarket or retail workers can both fall within the broad world of employer-owned insurance. Economically and ethically, however, they are very different arrangements.
Walmart was not the only company using broad-based COLI
Broad-based employer-owned insurance was not unique to Walmart.
Winn-Dixie, for example, owned policies covering more than 36,000 employees. The Eleventh Circuit described its program as having been designed around the tax deductions generated by borrowing against those policies. The court upheld the denial of the deductions.
A Florida Bar review of the history of employer-owned life insurance also identified companies including American Electric Power, AT&T, Dow Chemical, Nestlé USA, Procter & Gamble and Walt Disney among businesses that maintained broad-based programs during the period.
That does not mean every company that has ever used COLI operated the same kind of program Walmart did.
Modern online lists frequently mix together broad-based historical COLI, executive insurance, bank-owned life insurance and other arrangements as though they were identical. They are not.
Congress began dismantling the old tax strategy before 2006
The history is often simplified into:
Companies secretly insured workers → Congress changed the law in 2006.
The real chronology is more important.
1990s: broad-based COLI expands
Large employers purchased policies covering thousands or hundreds of thousands of employees.
The policies could produce death benefits, cash-value growth and, in some structures, substantial interest deductions associated with policy borrowing.
1996: Congress attacks the loan-interest strategy
The Health Insurance Portability and Accountability Act of 1996 substantially curtailed the ability to deduct interest associated with broad-based leveraged COLI programs.
IRS material describing those amendments says Congress changed Internal Revenue Code §264 specifically to deny interest deductions generated by broad-based leveraged COLI arrangements.
Walmart began unwinding its program within months of the change. Its remaining policies were terminated by January 2000.
1997: Congress tightens the rules again
Additional federal legislation placed further restrictions on deductions involving indebtedness associated with life-insurance policies.
The economics that had helped make enormous broad-based programs attractive were becoming considerably less favorable.
2006: Congress creates the modern employer-owned life-insurance regime
The Pension Protection Act of 2006 added Internal Revenue Code §101(j) and §6039I.
This is the change most current explanations focus on.
But understanding exactly what those sections do is critical.
Congress did not simply ban employer-owned life insurance in 2006
Ordinary life-insurance death proceeds generally receive favorable federal income-tax treatment.
For employer-owned life insurance, Congress created a special rule.
Under 26 U.S.C. §101(j), if an employer-owned policy does not qualify for one of the statute’s exceptions, the amount the employer may exclude from gross income is generally limited to the premiums and other amounts it paid for the contract.
In other words, the excess death benefit can lose the favorable federal treatment that normally makes life insurance so attractive.
To qualify for important §101(j) exceptions, the statute requires notice and consent before the policy is issued.
The employee must:
- be told in writing that the employer intends to insure their life;
- be told the maximum amount for which they could be insured;
- provide written consent to being insured, including acknowledgement that coverage may continue after employment ends; and
- be told that the employer or another applicable policyholder will be a beneficiary.
The IRS confirms those requirements in its detailed Notice 2009-48 guidance on employer-owned life insurance.
The IRS even says an employer cannot satisfy the maximum-coverage disclosure by merely saying the employee may be insured for “the maximum” available amount. The employer must disclose an actual dollar amount or meaningful formula, such as a multiple of salary.
That is a meaningful employee-protection regime.
But it is primarily part of the federal tax code.
That distinction changes the answer to the question most people actually want to know.
Federal consent rules and state insurance law are not the same thing
There are really two legal layers.
Federal tax law asks:
What conditions must the employer satisfy for the death proceeds to receive favorable federal income-tax treatment?
That is where §101(j)’s written notice-and-consent rules operate.
State insurance law asks:
Does the employer have a legally recognized insurable interest in this person’s life, and can the policy be issued at all?
Those questions are governed largely by state law.
And the differences can be striking.
California and Delaware show how different the rules can be
Consider two states.
California
California law generally prohibits a corporate-owned life-insurance policy purchased by a California employer, naming the employer as beneficiary, on a California employee who is not an exempt administrative, executive or professional employee.
The statute specifically defines corporate-owned life insurance and generally limits the exception to current or former exempt employees.
California’s separate insurable-interest statute also says an employer must obtain the written consent of the individual being insured.
So the kind of broad-based policy Walmart used on an ordinary hourly California worker would face substantial state-law restrictions today.
Delaware
Delaware takes a very different approach.
Its insurance code recognizes an employer’s insurable interest in employees under specified employer-owned insurance arrangements.
More strikingly, Delaware law expressly says that an employer or qualifying trust may obtain employer-owned life insurance on an employee in whom it has an insurable interest without notifying the employee or obtaining the employee’s consent.
That sounds contradictory to the federal rule until the two systems are separated.
Delaware is addressing whether the insurance arrangement can be effectuated under its insurance law.
Federal §101(j) separately determines whether the employer satisfies the conditions for the relevant federal income-tax exclusion.
Those are not the same question.
Which state’s law governs a specific multi-state employer or policy can itself involve additional legal issues, so California and Delaware should not be treated as a complete 50-state answer. They demonstrate something more important:
There is no single nationwide state-insurance rule that can be reduced to “employers must always get your permission.”
Could a company still insure an ordinary cashier today?
Potentially, yes.
Being a CEO is not universally required.
To understand a modern policy, four questions have to be separated:
- Does applicable state law recognize the employer’s insurable interest?
- Does state law permit a policy on that category of employee?
- Does state law independently require notice or consent?
- Has the employer satisfied federal §101(j) if it wants the applicable federal tax exclusion?
And there is another wrinkle.
A common explanation of the 2006 law says modern tax-favored employer-owned life insurance is essentially limited to directors and highly compensated employees.
That is incomplete.
Under §101(j), one of the statutory exceptions can apply if the insured was an employee at any time during the 12 months before death, provided the notice-and-consent requirements were met. The statute separately provides another status route for directors and certain highly compensated employees or individuals at the time the contract was issued.
Consider three simplified examples.
Current hourly employee
Suppose state law allows the arrangement, the employee receives proper notice and provides the required consent, and the employee dies while still working for the company.
The employee can satisfy the federal 12-month employment condition even though they were not an executive.
Former hourly employee who left years ago
The 12-month employment condition no longer works.
Whether another §101(j) exception applies becomes much more important.
Former executive
Someone who qualified as a director or highly compensated employee when the policy was issued may potentially fall within the statute’s separate status exception.
The details matter enormously.
Can your employer keep the policy after you quit?
Potentially, yes.
This is not an accidental loophole buried in the statute.
The federal notice-and-consent requirement explicitly says the employee’s written consent must acknowledge that the insurance coverage may continue after the insured terminates employment.
So leaving the company does not necessarily make an employer-owned policy disappear.
Whether a particular policy remains valid and how its eventual proceeds are treated depends on the contract, state law and federal tax rules.
Does your family receive the life-insurance money?
Not necessarily.
This is one of the easiest parts of COLI to misunderstand because most people think of life insurance as something purchased to protect a spouse or children.
Employer-owned insurance is different.
With conventional personal life insurance, the insured or policy owner generally chooses a beneficiary.
With ordinary employer-provided group life insurance, the workplace provides the coverage but the employee usually names the person who will receive the benefit.
With COLI, the employer may own the policy and be the beneficiary.
The company can therefore receive the death benefit.
Walmart’s historical program illustrates a hybrid arrangement. Certain employees’ beneficiaries received a separate $5,000 or $10,000 benefit, while Walmart received the remaining proceeds.
So it would be inaccurate to say the families in those Walmart cases necessarily received nothing.
It is equally inaccurate to assume that an employer-owned policy exists for the benefit of the employee’s family.
Employer-provided life insurance is not the same as employer-owned life insurance
This distinction is particularly important for employees who see “life insurance” in their benefits portal and wonder whether their employer is insuring them for itself.
| Type of insurance | Typical owner | Typical beneficiary | Who is the coverage primarily protecting? |
|---|---|---|---|
| Personal life insurance | Individual | Spouse, family or another chosen beneficiary | Individual/family |
| Employer group-life benefit | Employer/group arrangement | Beneficiary selected by employee | Employee’s beneficiary |
| Key-person insurance | Employer | Employer | Business |
| COLI/EOLI | Employer | Employer or another designated recipient | Depends on arrangement |
Simply seeing “company life insurance” in an employee-benefits package does not establish that the employer is secretly the beneficiary of a COLI policy.
The ownership and beneficiary designation are what matter.
Employer-owned life insurance still exists in 2026
COLI and BOLI are not historical curiosities.
Recent public-company filings continue to disclose them.
For example, Fidelity D & D Bancorp reported in its August 2026 SEC filing that it held single-premium bank-owned life-insurance policies on certain officers. As of June 30, 2026, the policies had about $60.2 million in total death benefits, with approximately $8 million payable to officers’ beneficiaries and the remaining $52.2 million payable to the bank.
That is not evidence of a Walmart-style secret rank-and-file program. In fact, it demonstrates why the distinction matters.
Modern employer-owned life insurance can involve executives, deferred-compensation obligations, employee-benefit financing and other business arrangements that bear little resemblance to the broad-based leveraged programs of the 1990s.
The insurance still exists.
The structure and regulatory environment changed.
How can you find out whether your employer has life insurance on you?
Congress also created an employer reporting requirement.
Under 26 U.S.C. §6039I, employers owning covered post-2006 employer-owned life-insurance contracts must report information including:
- the number of employees;
- the number insured under the contracts;
- the total insurance in force;
- identifying information about the policyholder; and
- whether valid employee consents exist.
Employers generally make that report using IRS Form 8925, Report of Employer-Owned Life Insurance Contracts.
Unfortunately, Form 8925 is not an employee lookup service.
It reports aggregate numbers rather than publishing a searchable list of insured employees, and it is attached to the policyholder’s tax return. Federal law generally treats tax returns and return information as confidential.
If you are trying to determine whether your employer owns insurance on your life, more practical places to look include:
-
Your onboarding and benefits documents. Search for “COLI,” “EOLI,” “employer-owned life insurance,” “company-owned life insurance,” or language authorizing the employer to insure your life.
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Any insurance-consent forms you signed. For federal §101(j) purposes, a modern consent should disclose a maximum amount of insurance and tell you that the employer will be a beneficiary.
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Your HR or benefits department. Ask a precise question: Does the company own or receive benefits from any life-insurance policy covering my life, separate from the group life-insurance benefit provided to me?
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Public corporate filings. Public companies sometimes disclose COLI or BOLI as assets in SEC filings, although those filings ordinarily do not provide a convenient list of individual insured employees.
If a particular policy has legal significance, the relevant state insurance regulator or an attorney can determine which state’s insurance law applies.
What about policies purchased before 2006?
The date matters.
The modern §101(j) framework generally applies to employer-owned life-insurance contracts issued after August 17, 2006.
IRS Form 8925 likewise addresses covered employer-owned contracts issued after that date. Certain exchanges of older contracts can retain grandfathered treatment, although material changes can cause a contract to be treated as newly issued.
That is another reason “everyone had to consent after 2006” is too broad a statement.
Old policies can raise different questions from newly issued ones.
So is “dead peasant insurance” still legal?
If by “dead peasant insurance” someone means any situation in which an employer owns life insurance on an employee and receives money when that employee dies, then yes, arrangements fitting that broad description still exist legally.
But that phrase collapses several very different things.
The aggressive broad-based leveraged COLI programs of the 1990s were heavily undermined by tax legislation, IRS enforcement and litigation.
Modern COLI and BOLI nevertheless remain established financial products.
Federal law now imposes substantial tax consequences and notice-and-consent conditions on post-2006 employer-owned contracts.
State insurance laws impose another layer of restrictions, and those laws differ considerably.
So the most accurate answer is not:
“Congress banned dead peasant insurance.”
Nor is it:
“Companies can secretly insure all their workers just like Walmart used to.”
The reality sits between those claims.
Why the practice still makes people uncomfortable
It is not difficult to understand the reaction.
Life insurance is normally associated with protecting someone who suffers financially after another person dies.
COLI reverses that familiar relationship.
The insured worker can die, the employer can receive the money, and the policy may even remain in force after the worker leaves the company.
That arrangement can feel particularly strange when the insured person is an ordinary worker whose death would not plausibly threaten the survival of the business.
At the same time, employer-owned insurance has legitimate uses. A company’s financial exposure to the death of a founder or important executive is real. Deferred-compensation obligations are real. Employee-benefit liabilities are real.
The mistake is treating every one of these arrangements as identical.
Walmart’s historical program deserves scrutiny precisely because of its extraordinary scale and its use of hundreds of thousands of rank-and-file workers as insured lives within a much larger financial structure.
That is a different proposition from a company insuring five key executives.
The bottom line
The Walmart story is real.
Walmart purchased life-insurance policies covering roughly 350,000 employees during the 1990s. Hourly workers Rita Atkinson and Karen Armatrout were among them, and Walmart received more than $66,000 and $72,000 respectively after their deaths.
But Walmart’s program was also a product of a tax environment that no longer exists.
Congress began restricting the financial mechanics behind broad-based leveraged COLI in 1996 and tightened the rules further afterward. In 2006, Congress created the modern federal regime governing employer-owned life insurance, including written notice and consent requirements tied to important federal tax treatment.
Employer-owned life insurance itself never disappeared.
And the most surprising part is that federal tax law does not completely answer whether an employer can obtain a policy on you.
State insurance law matters too.
In California, corporate-owned coverage on ordinary nonexempt employees is heavily restricted and written consent is generally required. Delaware law expressly permits certain qualifying employer-owned policies without employee notice or consent.
So there is no honest nationwide answer as simple as “your employer cannot insure you without permission.”
There is a better question:
Who owns the policy, who receives the money, what state law governs it, and what exactly did the employee agree to?
Those four answers tell you far more than the words “life insurance” appearing on an employee benefits page ever will.
References and Further Reading
Federal Law and IRS Guidance
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26 U.S.C. §101(j), Treatment of Certain Employer-Owned Life Insurance Contracts
The controlling federal tax provision defining employer-owned life insurance, its general tax rule, employee-status exceptions and notice-and-consent requirements. -
26 U.S.C. §6039I, Employer-Owned Life Insurance Reporting Requirements
Establishes annual reporting and recordkeeping requirements for applicable employer-owned contracts. -
IRS Notice 2009-48, Treatment of Certain Employer-Owned Life Insurance Contracts
Detailed IRS question-and-answer guidance interpreting §§101(j) and 6039I, including consent, maximum face amount, electronic consent and post-employment coverage. -
IRS Form 8925, Report of Employer-Owned Life Insurance Contracts
The form used by applicable policyholders to report employee counts, insurance amounts and consent information. -
26 U.S.C. §6103, Confidentiality and Disclosure of Returns and Return Information
Establishes the general federal rule that tax returns and return information are confidential.
Walmart and Historical COLI Litigation
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Atkinson v. Wal-Mart Stores, Inc., U.S. Court of Appeals for the Eleventh Circuit
Documents Walmart’s policies on hourly workers Rita Atkinson and Karen Armatrout and the benefits paid after their deaths. -
Wal-Mart Stores, Inc. v. AIG Life Insurance Co., Delaware Court of Chancery
Describes the approximately 350,000-policy program, its premium scale, financing and tax structure. -
Rice v. Wal-Mart Stores, U.S. District Court for the District of New Hampshire
Discusses Walmart’s employee notice, employee disputes over receiving that notice and the reported $36 million in 1994 tax savings. -
Winn-Dixie Stores v. Commissioner, U.S. Court of Appeals for the Eleventh Circuit
Important appellate decision involving a broad-based COLI program covering more than 36,000 employees and the deductibility of policy-loan interest.
State Insurance Law
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California Insurance Code §10110.4, Corporate-Owned Life Insurance
Restricts California corporate-owned life-insurance policies and generally excludes nonexempt employees from permissible new coverage. -
California Insurance Code §10110.1, Insurable Interest
Defines employer insurable interests and contains California’s written-consent requirement. -
Delaware Code Title 18 §§2704 and 2708, Employer-Owned Life Insurance
Defines qualifying employer-owned policies and contains Delaware’s express exception allowing certain employer-owned coverage without employee notice or consent.
Industry and Current Context
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National Association of Insurance Commissioners, Guidelines on Corporate Owned Life Insurance
Explains common uses of COLI, including key-person coverage, deferred compensation and benefit financing. -
Fidelity D & D Bancorp, Form 10-Q for the Quarter Ended June 30, 2026
A current SEC filing illustrating the continued use of bank-owned life insurance and showing how modern executive-focused arrangements can differ from historical broad-based COLI programs. -
The Florida Bar, Employer-Owned Life Insurance After the Pension Protection Act of 2006
Useful historical and legal synthesis covering broad-based EOLI programs and the changes enacted in 2006.
Editorial currency note: Federal tax and state insurance laws can change, and state rules governing insurable interest, consent and employer-owned policies differ. This article reflects sources reviewed through September 21, 2026 and should not be treated as individualized legal or tax advice.
