COLI Tax Savings Advantages

Protects Against Loss of Key Employees or Members

Insuring your essential employees or members is critical to the long-term health of any company or organization. This is especially true for those organizations that lean heavily on only a handful of individuals. Key-man life insurance is a commonly known form of corporate owned life insurance that is taken out on vital employees.

Do you have some form of a corporate owned life insurance program implemented for your business or organization? If not, there is no better time to start than now by contacting the specialists at Teachers Pension Advisory Services for a free assessment and evaluation. Even if you do already have a COLI program in place, we can help you to determine if your organization is paying way too much into your current corporate owned life insurance program and receiving inferior benefits compared to what transferring your existent, cash value benefits tax-free into a new, Teachers Pension Advisory Services-sponsored program could offer.

Not all corporate owned life insurance programs are created equally. Let us assist you in analyzing whether there is another type of corporate owned life insurance strategy that is clearly more beneficial, cost effective, flexible and with less inherent risk than what you currently have in place.

Tax-Free Exchanges

When your company or organization decides to implement a new, Teachers Pension Advisory Servicess-sponsored COLI program, your previous benefits can be eligible to be transferred into it.  Life insurance gives its owners, whether at the individual or organizational level, a unique opportunity to elect for tax-free, like kind exchanges. Through these exchanges, organizations may transfer cash value crediting earned through one life insurance plan directly into another.

The old cash value benefits that transfer can be credited directly into the cash value of the new program. TPA Services uses its industry insights and experience to help streamline this 1035 exchange process for clients who wish to transfer prior cash value benefits into our corporate owned life insurance programs.

Other Tax Benefits

Corporate owned life insurance plans offer significant tax advantages to their beneficiaries, and therefore, for maximum tax protection, should be owned by a COLI trust. In doing so, the benefits earned are able to remain separate from the balance sheets of the underlying business or organization. Corporate owned life insurance tax savings are immense. All death benefits issued from the corporate owned life insurance trust can also be received tax-free according to IRS Section Code 101.

The cash value that accrues within a corporate owned life insurance program utilizing a Teachers Pension Advisory Services, equity-indexed universal life structure grows both compounding and income tax deferred throughout the lives of their insured members and can be accessed by the organization pre-death. For COLI owners, keeping their plans in trust can generate millions of dollars in tax-free income that can be distributed to the underlying business or organization, as the designated beneficiary, to use how they see fit. These purposes can include paying for SERP plans, key man, split dollar or any other types of benefit programs and even for the funding of ongoing programs or operational expenses.

Creates Substantial Liquidity

Teachers Pension Advisory Services customizes each organization’s corporate owned Iife insurance plan with our stable, conservative philosophy. COLI represents an attractive way for an organization to raise capital for a variety of purposes.  The death benefits derived from all of the insured participants or members of the COLI trust are received tax-free by the underlying business or organization as its beneficiary.

COLI death benefits however, are not the only method for liquidity to be accessed by the underlying business or organization. Our corporate owned life insurance programs plans realize significant cash value accumulation within the program. As the beneficiaries of COLI, businesses and organizations may also elect to receive cash value from their program pre-death through tax-free distributions.  This additional liquidity can then in turn be used to help pay for various programs and expenses.

Offsets Expenses

Any business or organization understands that it is always important to prepare for the unexpected. It is impossible to know when it will be necessary to have extra liquidity on hand.

One of the best safety nets for your company or organization is a well-maintained corporate owned life insurance program. Corporate owned life insurance creates a reliable source of tax-free liquidity. The death benefit and cash value accumulation are dual equitable sources that can both be accessed either when an insured member dies or though the living benefits that tax-free, cash value distribution elections provide. 

Each organization brings with it different objectives in how they wish to treat their corporate owned life insurance benefits. TPA Services will build your organization a customized COLI strategy that suits your organization’s unique needs. We do so by structuring COLI programs with the flexibility and safeguards that permit organizations and businesses, as the beneficiaries, to access these benefits based on their ever-changing liquidity needs.

Your corporate owned life insurance benefits can be accessed at varying times and for varying needs including to pay down existent liabilities and organizational expenses. Our corporate owned life insurance managers will advise you the whole way through to ensure that all of the decisions made will maintain your long-term COLI and organizational objectives.

Employer and Employee Incentives

Employers and employees alike can enjoy the perks and incentives in their organization’s corporate owned life insurance program. The tax-free, cash value distributions and death benefits received can be used by the organization to fund or supplement SERP, key man, split dollar or for any other employee benefit program. Your hard-working employees will feel even more loyalty to their company by recognizing that their employee benefits and retirement are being secured.

Separate Accounts Provide Default Protection and Security From Creditors

Corporate owned life insurance trusts afford the underlying business or organization serving as the beneficiary an opportunity to institute their own COLI program with a limited liability structure, which keeps all of the costs entirely off of their organizational books and balance sheets.

Retention of Equity

If an insured employee or member in your corporate owned life insurance program leaves the organization either forcibly or voluntarily, the COLI trust still retains all of their individual benefits. There is in fact no disruption at all to the overall COLI plan in these circumstances.

Inflation Protection

There are several different types of life insurance structures that organizations must decide between when instituting a COLI program. Teachers Pension Advisory Services does not endorse ones that offer no significant cash value build up. Instead, we make a point to endorse and structure our COLI programs with an equity-indexed, universal life arrangement that produces consistent increases in its cash values with no downside crediting risks. We also make provisions for all of the individual death benefits to be automatically increasing annually, which serves as another effective hedge against inflation.