Companies have long insured the lives of executives, calling them important business assets. UBS and other financial companies have sold similar policies to wealthy people who want to leave money to charity. Attracted by tax benefits, companies also began taking out insurance policies on rank-and-file employees -- often without telling them -- in the early 1990s.
The insurance industry refers to the packages as corporate-owned life insurance policies, or COLIs. Many large companies have used varying forms of the insurance packages in the past, including Wal-Mart, which settled a lawsuit recently with families of employees who were angry when they received none of the benefits.
Several states, including California, have taken steps to crack down on the tactic, and many companies have voluntarily abandoned the arrangements.
UBS said its proposal is different because Texas would not use the program to generate tax breaks and would buy policies only for consenting retirees.
Insurance analysts said they believed the Gramm proposal represented a subtle but significant shift of "dead peasant" tactics from the private to the public sector.
"These things are under attack in the private sector," said J. Robert Hunter, a former Texas insurance commissioner who is now the director of insurance for the Washington, D.C.-based Consumer Federation of America. "To move it into the public sector makes no sense. These are not legitimate vehicles for fundraising."
Benito P. Barrera, 75, of Corpus Christi, Texas, was an elementary school teacher and principal for 35 years before he retired and began selling insurance. Barrera said he fears the arrangement would ultimately benefit Gramm and UBS, not aging education workers. Barrera charged that large corporations have a long history of manipulating senior citizens.
"The only ones who would make money are the people at the top," he said. "It's all about getting rich quick."
Trish Conradt, executive director of the Texas Retired Teachers Assn., an advocacy group, said the response of her organization's 50,000 members has also been negative, largely because health-care benefits for retired educators were cut in an effort to balance the budget.
"They would rather see the state provide resources for people who are still living so they can have a better quality of life," she said, "rather than waiting to make money on their death."