THE BILL ITSELF
HB 261
Restrictions on Employer-owned Life Insurance Policies
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A bill to be entitled
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An act relating to restrictions on employer-owned life
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insurance policies; creating s. 627.4635, F.S.;
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providing definitions; authorizing employer-owned life
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insurance policies covering certain key persons of
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business entities, organizations, companies, and
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corporations under specified circumstances; requiring
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certain disclosures to such key persons; prohibiting
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employer-owned life insurance policies covering
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certain employees; providing that policies covering
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such employees are void as against public policy;
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requiring insurer notice to the Office of Insurance
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Regulation of employer-owned life insurance policies;
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requiring the office to maintain a registry and to
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publish an annual report; requiring certain employer
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disclosures relating to employer-owned life insurance
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policies; providing that premiums, loan interests, and
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expenses related to employer-owned life insurance are
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not tax deductible; subjecting death benefits received
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by employers to corporate income tax; providing an
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exception; providing penalties; requiring the office
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to adopt certain standard forms by a specified date;
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providing applicability and retroactive applicability;
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providing an effective date.
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Be It Enacted by the Legislature of the State of Florida:
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Section 1. Section 627.4635, Florida Statutes, is created
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to read:
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627.4635 Restrictions on employer-owned life insurance
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policies.—
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(1) DEFINITIONS.—As used in this section, the term:
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(a) "Employer-owned life insurance" means a life insurance
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policy owned by, or payable to, an employer on the life of a
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current or former employee. The term also includes company-owned
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life insurance or corporate-owned life insurance, a life
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insurance policy owned by, or payable, to a company or
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corporation, rather than an individual, on the life of a current
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or former employee.
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(b) "Key person" means an owner, senior executive,
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director, officer, partner, or manager of a business entity,
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organization, company, or corporation whose death would cause
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direct, material financial harm to the business entity,
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organization, company, or corporation.
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(c) "Rank-and-file employee" means any employee who is not
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a key person.
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(2) EMPLOYER-OWNED LIFE INSURANCE POLICIES COVERING KEY
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PERSONS.—
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(a) An employer may purchase, maintain, or be a
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beneficiary of an employer-owned life insurance policy covering
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a key person only if all the following conditions are met:
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1. The employer has obtained the key person's informed,
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written, and revocable consent before purchasing the policy.
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2. The employer has provided written notice of the policy
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to the key person's spouse, next of kin, or estate
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representative within 30 days after issuance of the policy.
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3. The employer does not maintain more than five key
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person policies at any one time without prior approval of the
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office. The five key persons must be the five highest ranking
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persons in the employer's business, organization, company, or
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corporation, based on their seniority, salaries, and benefits.
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4. The death benefit of any key person's policy does not
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exceed five times that key person's average annual compensation
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for the 3 years immediately preceding issuance.
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5. Upon the key person's termination of employment, the
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employer either cancels the policy or, with the key person's
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written consent, transfers ownership to the key person or his or
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her family.
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(b)1. If an employer-owner life insurance policy is issued
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before July 1, 2026, and all the conditions in paragraph (a) are
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met, the employer must, by January 1, 2027, provide to the key
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person whose life is covered by the employer-owner life
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insurance policy the standard form described in subsection (7),
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which informs the key person that the policy does not benefit
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the key person, but fully benefits the employer, and that the
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key person has the option to opt out of the policy.
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2. If an employer-owner life insurance policy is issued on
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or after July 1, 2026, and before October 1, 2026, the employer
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must, before purchasing the policy, inform the key person whose
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life is covered by the employer-owner life insurance policy that
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the policy does not benefit the key person, but fully benefits
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the employer, and that the key person has the option to reject
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the policy.
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3. If an employer-owner life insurance policy is issued on
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or after October 1, 2026, the employer must, before purchasing
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the policy, provide to the key person the standard form
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described in subsection (7), which informs the key person that
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the policy does not benefit the key person, but fully benefits
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the employer, and that the key person has the option to reject
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the policy.
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(3) CERTAIN EMPLOYER-OWNED LIFE INSURANCE POLICIES
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PROHIBITED.—
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(a) Except as provided in paragraph (7)(b), an employer
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may not purchase, maintain, or be a beneficiary of an employer-
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owned life insurance policy if the policy covers a rank-and-file
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employee or if any of the conditions described in subsection (2)
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are not met.
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(b) Any insurance policy purchased or maintained in
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violation of paragraph (a) is void as against public policy.
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(4) NOTICES; REGISTRY AND REPORTING.—
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(a) Each insurer issuing an employer-owned life insurance
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policy shall file notice with the office. The notice must
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include the employer's name, the number of employees insured,
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and the aggregate face value of the policies.
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(b) The office shall maintain a publicly searchable online
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registry of the filings under paragraph (a) and shall publish an
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annual report of such filings.
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(c) An employer that purchases, maintains, or is a
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beneficiary of an employer-owned life insurance policy shall
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inform all key persons and shall publicly disclose, such as
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through publication on the employer's publicly available
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Internet website, that the employer has met all the requirements
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of this section.
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(5) TAX TREATMENT.—
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(a) Premiums, loan interest, or related expenses for
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employer-owned life insurance are not deductible under the law
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of this state.
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(b) Any death benefit received by an employer under an
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employer-owned life insurance policy is subject to corporate
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income tax unless paid directly to the employee's estate or
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family.
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(6) ENFORCEMENT AND PENALTIES.—
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(a) An employer that violates this section is liable for
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civil penalties up to five times the death benefit collected.
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(b) An employee's family has a private right of action to
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recover the full value of any benefit collected in violation of
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this section.
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(c) An insurer that knowingly issues or administers a
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policy in violation of this section is subject to an
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administrative fine of up to $1 million per violation and may
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have its authority to transact insurance in this state suspended
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or revoked.
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(7) STANDARD FORM.—By October 1, 2026, the office shall
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adopt a standard form, written in plain and simple language,
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informing a key person that an employer-owned life insurance
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policy does not benefit the key person, but fully benefits the
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employer, and that the key person has the option to reject or
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opt out of the policy.
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(8) APPLICABILITY.—
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(a) This section applies to all new policies issued on or
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after July 1, 2026.
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(b) The restrictions on and the prohibitions against
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employer-owned life insurance policies under subsections (2) and
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(3), respectively, apply retroactively to existing policies
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unless the insured employee or the insured employee's family
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affirmatively opts to maintain the policy and is named as the
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sole beneficiary, in which case all death benefits shall be paid
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to the employee's estate or designated family beneficiary.
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(c) If any provision of this section is in conflict with
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any other law, the provisions of this section shall govern.
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Section 2. This act shall take effect July 1, 2026.