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Executive Benefits

Executive Benefits. Why invest your time ?. Revenue Growth from within………. Assumptions: Produce 50K of premium year 1, then increase production each year by 10K for 10 years (ie.. 50K , 60K, 70K). Year 1: First Year Revenue = 30K

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Executive Benefits

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  1. Executive Benefits

  2. Why invest your time ? Revenue Growth from within……….. Assumptions: Produce 50K of premium year 1, then increase production each year by 10K for 10 years (ie.. 50K , 60K, 70K). Year 1:First Year Revenue = 30K Year 5:Total Revenue = 95K (37K in recurring revenue stream) ($370,000 YTD) Year 10: Total Revenue = 177K (88k in recurring revenue stream) ($1,022,000 YTD) Win Win Win ER – EE - Broker

  3. Group Long Term Disability Individual Disability Income (IDI) • Economies of Scale • ER owned • Designed for masses • Variable rate structure • Individually owned • ER sponsored • Value added, customized • Pooled, level-rate structure Integrated Group and Individual Disability Coverage Objective Utilize group and individual product platforms to create a more effective integrated disability program

  4. Integrated disability strategies All size cases SHORTFALLS & GAPS (Exposing the need) -Benefit maximums -Uncovered earnings -Taxability of benefits • VALUE ADDED • (Executive Benefit • Program enhancements) • - Contractual features • - Customization RISK TRANSFER (risk diversification) - Reduced exposure / pooling All size cases Larger cases - medium to high credibility

  5. 10K LTD Plan Max Shortfall & gap illustrated Assume 60% to 10K LTD plan Concern: Income replacement shortfall due to benefit maximum

  6. Shortfall & gap illustrated Assume 60% to 10K LTD plan The yellow “Total Income Replacement After Tax” column represents theNET after-tax income replacement. *Tax assumption - 28% Above chart is displayed graphically on next slide

  7. 100% 80% 60% Gross group LTD 40% Net group 20% LTD 0% $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Shortfall & gap illustrated “The tax bite” Assumptions: Non-contributory 60% to $10K group, net = 28% tax implications

  8. Uncovered earnings Pensions 401(k) Stock options Potential coverage GAP (income not insured) Deferred comp Incentive compensation Total compensation Salary GLTD

  9. The supplemental integrated solutionbefore-tax view 100% Back to gross replacement goal (Salary or total comp) 80% 60% Income replacement Supplemental IDI 40% Group LTD 20% 0% $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Annual earnings Assumptions: Non-contributory 60% to $10K group LTD, net = 28% tax implications IDI = 60% minus group LTD

  10. The supplemental integrated solutionbefore-tax view Enhanced income replacement to offset tax implications 100% (Salary or total comp) 80% Supplemental Income replacement 60% IDI 40% Group LTD 20% 0% $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Annual earnings Assumptions: Non-contributory 60% to $10K Group LTD, net = 28% tax implications IDI = 75% minus group LTD

  11. Carve out group Carving out a portion of high earning employees’ LTD benefit can reduce volatility in the Group LTD plan by shifting a portion of the benefit into a pooled rate individual platform. Fixed poolrated IDI& Variable experiencerated Group LTD Executives Senior Managers Earnings Variable experience rated Group LTD Managers Employees Integrated risk management • Transfer of risk: Individual experience does not impact group rating • Rate stability: Individual rates are fixed to age 65 and cannot increase • Value added :Additional features generate executive benefit perk

  12. LTD Plan Max Risk managementAge and income distribution review (Assume 60% to $10K LTD plan) • Concerns: • Volatility • Year-to-year fluctuations • Reserves impacting experience rates Large number of ages and incomes in narrow range equals predictability Small number of high earners can increase volatility in costs in any one year.

  13. Value added features in the IDI offering • Cannot be cancelled and contract cannot be changed • Level non-Cancellable contract premiums, up to age 65 • Individual ownership of policies (Portable) • No offsets with WC or SS or other government programs • Large case multi-life discounted rate structure • Recovery provision • Long term care exchange installs an asset protection feature into plan • Catastrophic disability benefit for more severe disabilities (optional)

  14. The value-added integrated solution:Enhancedfeatures 100% Catastrophic Disability Benefit 80% Supplemental IDI 60% Income replacement 40% LifetimeContinuation: Asset protection (long term careexchange) Group LTD 20% 0% $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Annual earnings Assumptions: Non-contributory 60% to $10K group, net = 28% tax implications IDI: 75% - Group LTD, Cat = 25%

  15. Integrated Group and Individual Disability Coverage What’s the bottom line? Integrating group and individual product platforms can create a more effective disability program for your clients and their employees. Group LTD IDI

  16. When would we recommend integrating group and individual? Unum will present an alternate integrated Group and IDI solution when plan review reveals: • “High risk” group LTD plans • Maximums over 10K / > 60% income replacements • Large income replacement shortfall • Risk tolerance: Customer would like more certainty vs. variability • Large claim exposure • Preventive large claim protection / Have not had a large claim yet • Installing a value-added benefit is of interest to a particular group • of EE’s / Executives • Longer term relationship and solution is desired

  17. IDI case study The Situation/Challenge Less than favorable disability income replacement for large executive population The Solution Decision made to offer IDI to executives Increased benefit maximum by 33% Result was $10k monthly disability benefit on guarantee issue basis Provided more robust income replacement that covered bonus compensation through fully portable IDI coverage at a 30% discount Achieved 40% participation in the new IDI plan and generated $750k+ IDI premium • Case at a glance • Information services company • 1,500 highly compensated executives across the country • “Risk transfer”–integrated LTD and IDI on executive class to off load some of the experienced rated LTD risk • Solved the income replacement need for executives

  18. The Situation/Challenge Less than favorable disability income replacement for large executive population The Solution Offered additional IDI on GSI/GTI basis along with catastrophic benefit for key executives Provided up to 100% income replacement for certain executives Increased the benefit max to $25k ($35k with catastrophic) Generated $2,700/month at maximum compensation rates Option to offer voluntary IDI to others in company IDI case study • Case at a glance • Small financial company • 14 highly compensated executives across the country • Provided more robust income replacement through highly integrated offering

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