Corporate & Bank Owned Life Insurance FAQ

Structure

Corporate owned life insurance programs have been a fixture in the business world for decades. While many companies and organizations are trapped spending exorbitant amounts on their employee benefit programs, they may not realize that simply adding a corporate owned life insurance program into their organizational portfolio could do wonders to mitigate these expenses.

The life insurance industry is constantly changing and so are its corporate owned life insurance products. Don’t fall behind by sticking with a corporate owned life insurance program that is costing way too much and providing inferior benefits compared to one that Teachers Pension Advisory Services can offer.

If your organization already has a long-standing COLI program in place, those cash value benefits that have been accumulating inside of the program do not have to stay behind. Instead, corporate owned life insurance provides its beneficiaries the opportunity to transfer the cash value benefits that have been accruing inside of one COLI program completely tax-free into a new and improved one.

TPA Services can help your organization implement a better COLI program. Corporate owned life insurance requires advanced, life insurance planning solutions. Teachers Pension Advisory Services has COLI managers who understand the degree of expertise and industry insights required to formulate the ones that stand out from the rest. COLI creates a substantial, tax-free income stream which companies and organizations, as the beneficiaries, can use in a variety of ways including to assist in the funding of employee benefit programs, operational expenses and to help supplement SERP (supplemental executive retirement plan) obligations.

In order to implement a successful corporate owned life insurance program, each business or organization will first have to locate insurable members or employees. This can include just one or a handful of employees (often called key-man programs) up to the top 35% or more of all employees or members.

IRS section code 101 requires that any employees or representatives covered under these plans must be notified and may have to undergo medical underwriting in order to qualify for coverage.

In order to maximize the effectiveness of a COLI program as well as provide extra protection for the underlying organization deemed the beneficiary, a corporate owned life insurance trust should be formed to house the COLI program. This allows all of the COLI benefits to be distributed tax-free back to the underlying organization as the beneficiary.

The corporate owned life insurance trust that is formed is considered the official owner of the plan with the underlying organization typically designated as the direct beneficiary. As a major accounting benefit, because the COLI plan is in trust, all of the corresponding accounting and recordkeeping of the trust has no direct effect on the underlying organization’s bottom line.

Each individually covered member of the corporate owned life insurance program is placed in a collective pool in which all the benefits from each participating member can be accessed by the COLI trust. All benefits from each participating COLI member, including the tax-free distributions, tax-deferred growth of the program’s cash value and the tax-free death benefits are aggregated together inside of the complete corporate owned life insurance program. All of these benefits can be accessed by the COLI trust and then distributed back to the underlying organization (also tax-free) to be used how they see fit.

For example, portions of any cash value benefits that are accumulating inside of each individual member’s policy can be accessed by the trust as a living benefit and then transferred to the underlying business or organization through the use of tax-free distributions. The death benefits of each individual insured member will be paid by the corporate owned life insurance trust to its beneficiaries (typically the underlying business or organization) based on that individual’s insurable interest that is due to be paid out upon their death.

How Your COLI Carrier Is Selected

Teachers Pension Advisory Services is proud of our independence as well as our well-respected place in the life insurance industry. We team up with leading, A-rated life insurance carriers. They represent some of the oldest and most successful companies in the world today. These companies are the life insurance providers with some of the richest histories and track records of success in serving their customers well.

Life insurance costs can vary dramatically company-to-company and even product-to-product for the same types of plans and coverage levels. This makes it even more imperative for the consumer to consider and research as many different carriers and products as possible before implementing a corporate owned life insurance program.

That is exactly what the corporate owned life insurance managers of TPA Services can offer your organization. As an independent agency, we look out for your interests. Our corporate owned life insurance specialists analyze not just one but a host of A-rated carriers, so our clients are not the ones getting shortchanged by high costs and inferior COLI products.

Qualifying

COLI-eligible participants come from all across the public and private spectrums. They can include almost any type of public or private entity including corporations, hospitals, medical and legal practices, nonprofits, universities, foundations and other charitable organizations.

Contact Teachers Pension Advisory Services today to find out from our team of corporate owned life insurance managers which type of benefit program would suit your business or organization best. COLI programs can be financed or unfinanced depending on the financial suitability and long-term needs for each business or organization.

Most of our clients who qualify to participate in one of our advanced planning, corporate owned life insurance programs will choose to have their COLI costs financed at exceedingly low interest rates. Our financed, supplemental executive retirement planning services utilize the same strategy that more than 70% of recent Fortune 1000 companies have also chosen to incorporate into their portfolios. Of the top 50 banks and thrift instituions in the United States, over 80% have reportedly financed their employee benefits.

Teachers Pension Advisory Services partners with a select group of lenders who specialize in corporate owned life insurance financing programs. We manage all of the lending and life insurance aspects of these cases at all times for our clients while they sit back and reap the benefits.