FixFlex.Org

From Gerald B. Wetlaufer, Professor of Law

Based on email exchanges with my colleague Shelly Kurtz and, at his suggestion, with Richard Saunders, it is now clear that the proposed changes regarding life insurance would have a serious, adverse and immediate effect on, among a great many others, all University employees who are suffering from a serious or life-threatening disease.

I am not referring to the fact that these employees would be required to pay life insurance premiums that had previously been paid by the University.  That would be true for every single University employee.  The effect to which I refer - and this is a fact that might have some urgency for employees who are seriously ill - is that the size of their estate would be immediately and irrevocably reduced by an amount equal to one entire year’s salary.

Under the Committee’s proposal, the University will reduce the amount of available Group Life insurance from three-times annual salary to two-times annual salary.  We are then disarmingly told that "Individuals could choose to buy additional life insurance," a declaration that seems intended to suggest that the proposal would - at worst - shift some of the cost of life insurance off of the University and onto the individual.  This presumably refers to the possibility that such employees could make up in the reduction of their Group Life insurance by purchasing additional Supplemental insurance.

This suggestion that employees can make up the loss by buying additional Supplemental insurance overlooks two crucial facts.  The first is that Supplemental Life is subject to a 3.5-times-salary limitation, the Committee proposes no change in that maximum, anyone who is already buying the maximum amount of Supplemental Life will not be entitled to buy more.

The second such fact is that employees suffering from serious or life-threatening diseases are barred from buying additional life insurance because they could not pass the required physical.  For all employees who are in this situation, the proposed reduction in the Group Life Insurance would constitute an immediate reduction - in the amount of one entire year’s salary - in the size of their estate.  And it probably goes without saying that this is a group of employees for whom the size of their estate might have special and immediate importance.

[Shelly Kurtz, who is a friend and colleague as well as a member of FRIC, has seen and confirmed this description of the proposal, but offers one additional point that was evidently not reflected in the Committee's submission to the President.  He reports that the Committee "hopes" and "expects" - but "cannot guarantee" - that our insurance company (Principal) will allow employees to make up whatever would be lost through the proposed reduction in University-funded Group Insurance through the employee's purchase of additional insurance - not as additional Supplemental Life but as additional Group Life.  This decision would be entirely up to the insurance company.  If it agreed to allow such purchases, and to allow them without proof that the employee suffers no illness, then the only effect of the proposed change is that the cost of the life insurance coverage would be shifted from the University to the employee.  It appears that this right to purchase additional Group Life insurance is not a part of FRIC's submission to the President, that FRIC's submission to the President is not formally contingent on this right-to-purchase, and that the decision whether to offer this coverage is entirely up to the insurance company.]

- Gerald B. Wetlaufer, Prof.
University of Iowa College of Law
Iowa City, Iowa
Gerald-wetlaufer@uiowa.edu