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Qualified Life Insurance

Qualified Life Insurance. High early cash values Year 1 cash value up to 80% of 1 st year premium Competitive premiums 401(k) and “cash balance ” plans. Policy Form 2098-U; ICC08-2098-U. Effective broad premium range Strong term and endowment solves

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Qualified Life Insurance

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  1. Qualified Life Insurance

  2. High early cash values Year 1 cash value up to 80% of 1st year premium Competitive premiums 401(k) and “cash balance” plans Policy Form 2098-U; ICC08-2098-U

  3. Effective broad premium range Strong term and endowment solves Excellent guaranteed cash values Attractive target premiums 401(k) and Traditional DB plans Policy Forms2099-U, ICC08-2099-U

  4. Survivor benefits for specialty retirement plans Insured 430(d) and 412(e)(3). Split funded plans with flexible premium annuity riders

  5. Life Insurance in Q-Plans • Profit Sharing & 401(k) plans • Aged Money Rules • Defined Benefit plans • Increases contributions • Cash Balance & 401(k) combo plans • Life in CBP => No aggregation

  6. Incidental Limits Defined contribution plans < 25% of cumulative contributions for UL < 50% of cumulative contributions for WL Defined benefit plans 100 times the expected monthly benefit Rev. Rul. 74-307 (duplicates DC rule)

  7. Reasons to Include Life Insurance in a Qualified Plan • The life insurance premium is tax deductible, even when the participant receives a substandard rating • Compared with buying life insurance outside of the plan, you can get more coverage from the same out-of-the-pocket expense or the same coverage for less. • In a Defined Benefit plan, a large deductible premium results in the government, in effect, subsidizing the substandard rating. • Plan life insurance saves the employee the personal premium expense.

  8. Reasons to Include Life Insurance in a Qualified Plan • Life insurance paid from the qualified plan is estate tax exempt if paid to the spouse using the unlimited marital deduction. • Income-tax-free death benefit proceeds, the net amount at risk is income-tax free. • Life insurance creates a larger deduction in Defined Benefit plans. • Life insurance in a qualified plan is generally protected from creditors.

  9. Qualified Plan Life Insurance Exit Strategies • Five possible outcomes • Death of participant while policy is in plan • Surrender of policy by plan • Distribution of policy to insured participant • Sale of policy to participant • SML’s Net Amount At Risk Exchange Rider

  10. “Easy Issue” Program Advantages: • No added loads or fees • No automatic blood/urine/exam • Simplified application (6 questions) • No reduction in the dividend scale

  11. “Easy Issue” Simple Rules: At least five policies must be issued under the plan. Maximum age 60 The case must meet the participation requirements in the following table.

  12. Simplified Underwriting Maximums • $500,000 Maximum: Standard – Table 4, flat extras through $10.00 permanent. • $320,000 Maximum: Table 5 – Table 12, flat extras of $12.50 - $30.00 permanent. • $120,000 Maximum: Table 16, flat extras of $40.00 or more permanent. • Maximum Face Amount per participant will be based on the incidental death benefit rules applicable to Qualified Plans.

  13. SML Advanced Marketing Support Plan Consultation Agent Client & CPA Life Insurance Products & Service SAI Plan Documents Plan Administration Tax Reporting Advanced Plan Design Super Comp. DB & 412(e)(3) Conversions Cash Balance Plans We Do it All!

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