Would the reduction in basic survivor benefits affect private, employment-based provisions for life insurance?
Probably not. Employment-based life-insurance is generally not coordinated with Social Security. About 60 percent of private sector employees and 80 percent of state and local government employees have some sort of employer-financed life insurance. It typically is paid as a lump sum. The most common lump-sum is equal to one-year’s salary, although some plans pay two years’ of the deceased worker’s salary. The median amount in private plans is about 1.5 times salary. In state and local government employment, the median is about 2 years’ salary. Some life insurance plans pay a flat dollar amount. In these cases, the median amount is about $15,500 in private plans and about $17,500 for state and local government employees (DoL, 1994, 1996, 1996). Very rarely does employment-based life insurance pay regular monthly survivor income benefits to children or widowed spouses. Such coverage was reported for only 5 percent of full-time employees in medium and large firms, and virtually not at all
