
Google Keeps Paying Deceased Employees' Families for a Decade - jbredeche
http://www.theatlantic.com/technology/archive/2012/08/google-keeps-paying-deceased-employees-families-for-a-decade/260897/
======
NDizzle
This kind of stuff is great, and great is an understatement.

When my Dad passed back in the early '90s from cystic fibrosis, the company he
worked for (for about 15 years) continued to pay our family his entire salary
for 3 years.

That was what enabled me to be where I am today. It allowed my Mother, who was
a stay at home Mom with two wild ass kids, to take the time out to get a solid
vocational education and get a job that pays a decent wage.

Anyways. Good on google.

------
rhplus
This is just a life insurance policy being rebranded and puffed up by Google
PR & Google HR.

Life insurance is a standard benefit among many top employers. What makes
Google a bit different is that they're paying out 10 x salary, which is
probably at the higher end of the spectrum of policies like this. I think my
previous employer paid something like 4 x salary for death through illness and
10x for accidental death. Perhaps Google is happier to pay higher premiums or
they've negotiated down thanks to a younger and healthier corpus of employees?

~~~
shasta
Half salary for 10 years would be 5x salary, nominally. Present value is
probably around 4x salary.

~~~
hessenwolf
The interest rate is really so fucking low at the moment that the present
value is about the same as the nominal. I would expect a survivor benefit to
be inflation indexed too.

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cletus
Speaking as a Google employee who does NOT speak for the company, I remember
reading the notice about this. This is separate to life insurance (which we
also get).

~~~
brudgers
Disclaimer: I am not an actuary.

The rules governing Corporate Owned Life Insurance require notification except
in the case of highly compensated employees (over $95k/year), according to
Wikipedia.

<http://en.wikipedia.org/wiki/Dead_peasant_insurance>

Looking at it cynically or from the standpoint of cold hard cash - take your
pick - it looks this sounds like "dead peasant insurance 2.0" - i.e. an
actuarial scheme for the age of blogs and the PR nightmares they can create.
When considering life insurance as a financial instrument, Google is in a
position to structure the policies in ways which benefit their own bottom line
(consult your tax attorney and re-insurance provider for details). I would
conjecture that the level of Wall Street analyst outrage over this benefit is
probably proportional to the drag the policy creates on Google's gross
revenues.

The worst case payout would probably be somewhere around six times annual
salary - married, quadruplet infants, and little return on investment over the
lifetime of the annuity payments. Actuarially, it may be significantly less
across the pool of Google's employees.

The neutral case is an employee with a role that it makes sense to insure
anyway, and the death benefit creates only a marginal increase in policy price
(one which may well be offset through retention and goodwill).

The best case is zero - no spouse or domestic partner, no kids.

Like many things in Silicon Valley, I suspect that the entire investment is
funded by the homeruns. Young employees, such as new college grads, are the
least expensive to insure and would generally provide the highest rates of
internal death benefit retention and the highest probability of cash value
retention due to resignation. By coincidence, this also happens to be a
demographic Google recruits heavily.

None of this is to say that this is bad for Google employees - it may in fact
be a win-win. Only that it is unlikely to be munificence on the part of Google
as the article implies. I suspect that following the money will lead to the
bottom line.

~~~
Evbn
How woukd Google make any money by buying an insurance policy that has the
employee's family as beneficiary? They can't save more on taxes than they pay
on premiums.

------
melvinram
I envy not Google employees who get these benefits. I envy Larry Page and
Sergey Brin for founding and building a company that is capable of offering
these types of benefits.

~~~
patio11
You don't have to be all that envious of the capability to offer this
particular one. As pointed out by many people here, it is rebranded term life
insurance, and _dirt cheap_ for the typical HNer. Kalzumeus bought a $500k
policy for me when I got married. The rate (locked in for the next 10 years)
was in the tens of dollars per month. I'm pretty sure it is tax-deductible
(confidence for Japan: near total, US: fairly strong), too, but if my
accountant has a problem with that it is still in the tens of dollars per
month.

Google can afford to a) self-insure and b) afford modestly higher policies at
the upper end without a physical and possible reject (my insurance agent was
"only" willing to go up to about a million before they started asking
questions), but they're not uniquely capable in this regard.

~~~
slurgfest
Perhaps I have misunderstood the terms of what Google is offering.

You say tens of dollars. You are taking pains to indicate how little it costs,
so I suppose that means at least $20. If you started at (say) the age of 30,
it doesn't much matter about the rate in the next 10 years - what matters is
the next 45 years or so. By the time you are 75, what will the rate be? And
what proportion of 5 years salary will it pay out?

Insurance agencies are not charities, nor do they pay your salary; they
operate on a for-profit basis. The insurance agency is not going to offer you
a deal that loses them much money on average. If they never raise the rate and
you die promptly at 75, you have only paid in $10,800 (aka $2,160/yr for 5
years, which is a pittance). Since they hold the money they make some
interest, but if they pay out much more than you paid in (since they do still
have to pay their own bills) they don't break even, and they can't survive if
that is the usual case.

They are going to have to dramatically raise your rates, or pay much less at
the end, or make it less likely that the benefits will be paid out. More
likely all 3.

So I am skeptical that the relationship of a Google employee to their death
benefits is really comparable to your relationship with your insurance agent.

~~~
patio11
A benefit that never decreases, premiums that never increase, no questions
asked for less than a million bucks, and a configurable end date picked in
advance? The industry has a word for this. It is called term life insurance.
It is a very inexpensive commodity trivially available from hundreds of
providers, which is why they spend hundreds of millions so you remember the
talking duck.

~~~
cantrevealname
I don't understand how that answers the valid points that the person above
(slurgfest) raised. It seems _impossible_ to me that any company could offer a
policy such as yours (patio11) for 45 years. (Yes, I know that you said that
yours is 10 years, but please bear with me for the sake of my example.)

I think that slurgfest was trying to point out the flaws in the following kind
of reasoning:

\- A man buys a term insurance policy at age 30

\- The policy that costs $20/month

\- After 45 years, the total cost would be $20 x 12 x 45 = $10,800

\- If the man dies at age <= 75, the policy pays out $500,000

\- The average life expectancy in the US is 75 years (Wikipedia)

No company could offer a policy like that, right? There's a 1 in 2 chance that
the insurance company will pay $500K but will only have received fees of $10K.

If the scenario I've described _is_ possible, could you--or anyone--please
explain why the insurance company wouldn't go bankrupt?

~~~
patio11
_Yes, I know that you said that yours is 10 years, but please bear with me for
the sake of my example._

Do you understand that the "term" in "term life insurance" is a very, VERY
important detail? If you carry the term out to where there is an actuarial
likelihood (or certainty!) of death, then yes, term life insurance does get
radically more expensive. If you cover a) someone's working career or b)
someone's expected career with a particular company, term life insurance
remains quite inexpensive.

------
Eduardo3rd
Wouldn't it be much cheaper to offer a life insurance policy for each employee
that would pay out enough to generate this much income at a relevantly low
interest rate? Or is that what they are actually doing and just packaging it
differently?

~~~
cperciva
This is a life insurance policy, except that Google is self-insuring.

~~~
Shebanator
It is a life insurance policy, but that isn't the only difference. A key point
for me is that google employees are ensured to a very high level without
having to send the insurance company the results of a medical exam. Most
companies I've worked at can only insure you to 2x or 3x your annual salary
without the exam, and they charge you extra to provide even this level of
coverage. Google's policy is slightly better than 5x.

~~~
yummyfajitas
_Google's policy is slightly better than 5x._

If you ignore the time value of money.

Google's policy is 5x your salary, but spread out over 10 years. Much better
(for you, worse for google) to get the cash up front.

~~~
Shebanator
Its true that theoretically the value of 3x up front is in the same ballpark -
but only if you invested _all_ of it wisely. But in reality my wife would need
to use the entire benefit to pay down our mortgage and refi, so those
theoretical gains mean little. Meanwhile, she has to somehow get enough income
elsewhere to pay what is left of the mortgage, our kids college, etc. Knowing
there is some real level of income security for 10 years is way way better.

~~~
Dylan16807
Isn't the mortgage a high interest rate compared to investment? That should
save you _even more money_.

------
csmeder
So soon as you leave google you have to sign up for a real life insurance
plan? At that point you may be too old to get one at a good price. This seems
like a sneaky way to scare people from leaving google?

As I understand it at a normal company you pay into a life insurance plan each
month from a young age, so that if you take this plan with you to a new
company you get to keep the low rate you have earned. With google you loose
all your life insurance if you leave Google!

Am I confused or is this a crummy deal?

~~~
sp332
_This seems like a sneaky way to scare people from leaving google?_

What, by making "working at Google" better than "not working at Google"?

~~~
csmeder
I posted this before some one said "It's not in lieu of normal life insurance.
It's an additional benefit."

If this was in lieu of normal life insurance (Which every major tech company
supplies their employees) this would be a crummy deal. And a sneaky way to
skimp on life insurance.

If this is confusing I will give you an example.

John works at say Firefox. He is given a 500k life insurance plan as part of
his benefits.

Mike works at google and he is given (100k / 2) * 10 as a death plan (but not
life insurance).

After 20 years of work John leaves Firefox and Mike leaves Google. Both leave
to do contract work.

John's life insurance plan is portable so he is able to keep it by paying a
small amount each month.

Mike has no life insurance plan. He has the option to buy one on his own. This
is expensive as he is 20 years older now and has medical conditions that he
didn't have 20 years ago. It is so expensive that he can't afford life
insurance at this point.

John has the exact same condition, but his plan was portable so he doesn't
have to pay high amounts each month.

Both John and Mike die a year later due to their condition.

John's family is given $500k. Mikes family gets nothing. And google got away
with paying $0 to provide Mike with a death plan. Firefox spent thousands of
dollars over the last 20 years to provide John with a portable life insurance
plan.

Moral of this story this is why a death plan in lieu of life insurance is
crumby. However, it turns out Google is giving away both, so everyone wins :)

------
fsckin
Morbid as this may be, it's common practice. There was a scandal about it
involving Walmart not long ago where they gave absolutely nothing to the
family.

[http://consumerist.com/2007/07/walmart-took-secret-life-
insu...](http://consumerist.com/2007/07/walmart-took-secret-life-insurance-
policies-out-on-employees-collected-after-their-death.html)

~~~
harryh
That scandal was retarded. They did it for tax reasons. You can certainly
argue that the tax code should be changed, but arguing that the families were
somehow entitled to something just because it was called life insurance was
ridiculous.

~~~
eru
What loophole in the tax code makes that behaviour worthwhile?

~~~
timmaxw
I think the loophole was that insurance premiums were tax-deductible, but
insurance payouts were not taxed. Wikipedia has an explanation
[http://en.wikipedia.org/wiki/Corporate-
owned_life_insurance#...](http://en.wikipedia.org/wiki/Corporate-
owned_life_insurance#1950s:_Leveraged_insurance), but I don't fully understand
it.

~~~
droithomme
It's exactly as you say.

Let's say you have $1 million in profit this year. You can pay 35% corporate
income tax on it, $350,000.

Or you could buy $1 million in insurance which is a deductible business
expense, pay no taxes at all and have "no profit". Then, as employees die, you
collect $950,000 in completely tax free insurance payouts (the $50,000 is the
insurance overhead).

You just saved $300,000 in taxes and have a $950,000 a year untaxable profit.
For tax purposes, your company is unprofitable, but for profit purposes you
are doing great.

------
j_baker
Somewhat random (but non-trolling!) question: Why is it considered good for
Google to give its employees lavish benefits while it's considered extravagant
for Wall Street companies to give lavish benefits? I personally feel this is a
valid way of viewing things (I may be biased), but I can't quite put my finger
on why.

~~~
wutbrodo
Because Google has never been bailed out by taxpayers. The idea that Wall
Street was able to socialize its losses and claim all its gains for itself,
and then go right back to paying out extremely high amounts, is what rankled
people a lot more than "those benefits are lavish, per se".

~~~
gaius
Larry and Sergey get free parking for their private jets at a NASA facility.
Google has its feet as under the government table as Goldman Sachs. In the UK,
they evade tax by hiding profits offshore. They just have better PR.

~~~
jonhendry
Not quite free:

"How did the two billionaires get such a coveted parking place? Officials at
NASA Ames Research Center said the space agency signed an agreement signed
last month that allowed it to place instruments and scientists on planes owned
by principals of H211, which in addition to the Boeing 767-200 includes two
Gulfstream Vs, to collect scientific data on some flights. In exchange, NASA
will receive about $1.3 million in annual fees for being host to the plane at
Moffett, said Steven Zornetzer, associate director for institutions and
research at NASA Ames Research Center."

------
ChuckMcM
Wow, this is the same guy who decided that engineering managers cannot share
with their reports the calibration number which is the basis for all their
variable compensation calculations. I wonder if you keep the same number after
you die or if they set it to 0 since you're not really contributing as much
any more.

------
kkjhcyuwb
This is in addition to regular life insurance that Googlers get, not instead
of.

------
clarky07
This sounds great when you write it like this, but it's a $10 a month life
insurance policy. If they have another regular life insurance policy that's
fine, then it's $20 a month. Not exactly mind blowing when we are talking 6
figure salaries. Awesome, everyone just got a .1% raise. yay.

------
coopdog
As admirable as this is (they're basically giving employees a free, low hassle
premium life insurance plan), I can't help but feel that this is a will
calculated way to widen the gap between goog and startups. I imagine employee
spouses have a huge reason now to talk their partners out of leaving their
cushy job. 'If not for yourself then think of us...'

~~~
JoeCortopassi
Isn't that kind of the point of benefits? Make your company more attractive
than the next, for potential new hires

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yason
That's just proof that half a day's of work isn't productive anyway. The guy
lives, gets half of his salary for trying to do work and the other half of
actually doing it. The guy dies, the productive half of his salary disappears
but the unproductive half continues. :)

------
melvinmt
Wow, Google's a great place to die.

~~~
Eduard
Google is a great place to have your partner work there, then let your partner
die...

~~~
slurgfest
While you work at Google, you get a personal benefit from this policy which
tracks with your degree of anxiety about the financial impact of your death.

------
keithpeter
As the original article states, this benefit will mean more to older
employees. Do HNers think this will lead to the median employee age at Google
increasing over time?

------
selvan
Wow..loved last line of the post.."Google has an interest in being seen by its
staff not just as a place of work, but as a way of life. Even in death."

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rprasad
I can see the headlines now: "Is Google's Generous Post-Death Policy the New
Unfunded Pension Liablity?"

EDIT: Google's policy is _not_ life insurance. The post-death salary payments
appear to come out of Google's pockets, not the pockets of an insurer or
reinsurer. /EDIT

This may help Google compete right now, but in the long run, it will be the
same drain on the company's resources that pensions were for Detroit. When
Detroit was giving out pensions like candy, it was the top-grossing industry
in the world; they were making margins close to what Apple makes today. It
helped them recruit the best and brightest talent. But then a funny thing
happened: the market corrected itself. Cars stopped earning bank. Margins
fell, and even the biggest carmakers started going out of business.

We're in the glory days of the web industry, the only difference being that
most websites don't even make money before getting sold. But investors will
catch on, eventually, like they always do. And when that happens, policies
like this will start to go away, just like they did for Detroit.

~~~
Evbn
Short term life insurance is far less than risky than lifetime pension.

------
vexxt
Larry Page probably got health issues (he lost his voice) that lead to this

