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Comment by mbrubeck | Hacker News Reader

This doesn't do a very good job of explaining the tax consequences, but: "Wal-Mart, which said it canceled its policies in early 2000 because it was losing money on the arrangement, says the program was intended to reduce its income taxes to help pay rising employee health care costs." -- http://news.tbo.com/news/metro/MGB5SEJVN3F.html

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Over the long term wouldn't a company lose money on life insurance policies such as this? If you are buying insurance then you are betting that you are better at actuary analysis than the insurance company. Insurance companies are for-profit entities.

Insurance is useful for protecting against large losses that would impact your solvency, so I don't understand why Wal-Mart would have had these policies in the first place.

Ya, if it was straight up insurance it wouldn't have made sense. The (theoretical) benefit was from some sort of tax thing that I honestly don't understand. Something about borrowing the money to pay the premiums now (so you pay less taxes now) and then ?somehow? not just having to pay the taxes later when the insurance got paid. Or something like that?

if Walmart actuaries knew that Walmart employees die sooner than non-empoyee peers...

In this instance you don't have to beat the insurance company, you only have to beat taxes.

You don't have to beat the actuaries. The actuaries just have to take less profit than what you would have paid in taxes for the plans.

With perfect prediction (actuary tables), you would break even minus the profit of the insurance company. Since you paid the premiums with before tax money and the benefit is tax free, you make money depending on the relationship between your tax rate and the insurance "tax."

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