Life Insurance

FAR 31.205-19 makes the cost of life insurance on the lives of executives an expressly unallowable cost unless the insurance is part of the compensation package of the executive. If the life insurance was not compensation to the employee, resulting in the premiums not being allowable, the death benefits would not have any impact on costs allocated to government contracts. The kicker here is the deferred comp agreement. The mere existence of such an agreement does not mean that there is any allowable cost. What needs to be explored is the effect of such an agreement on the question of whether the life insurance was a part of the exec's compensation.