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uninsurable, in a tax-exempt money market fund. Prime maintained
commission-sharing arrangements with the insurance companies that
wrote these insurance policies. Prime usually earned a
commission equal to 22 percent of the amount paid for life
insurance and 1.2 percent of the amount paid to fund DWB's.
Employers typically contributed $50,000 to the Trust. Generally,
$6,000 of this amount was used to purchase life insurance and the
balance ($44,000) to fund DWB's.
3. Death Benefits
If a Covered Employee died while employed, a death benefit
became payable to his or her beneficiary in the amount set forth
by the employer in the Adoption Agreement. This amount was
generally stated as a percentage of the Covered Employee's
compensation or, if higher, a set minimum amount. For a Covered
Employee who was other than a standard underwriting risk, the
death benefit could be reduced or eliminated, depending on the
provisions of the employer's Adoption Agreement.
Death benefits were typically funded through universal life
policies. Under such a policy, the premiums in excess of the
amount necessary to fund current mortality and administrative
expenses are typically invested by the carrier at a fixed rate of
return. This rate of return may vary over time, although
carriers generally guarantee a specified minimum return.
The amounts paid by the Trust for the universal life
policies were generally separated into two amounts: (1) The
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