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AALU’s Educational Webinar Series Presents:

AALU’s Educational Webinar Series Presents: Bank and Business Split-Dollar Plans: Maintain, Revise or Eliminate? Presented by Jim Foyt, CPA of EBS, LLC & Francis X. Grady, JD of Grady & Associates Moderated by Lee Nunn, CLU, CPA AALU Nonqualified Plans Committee Chair October 9, 2007.

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AALU’s Educational Webinar Series Presents:

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  1. AALU’s Educational Webinar Series Presents: Bank and Business Split-Dollar Plans: Maintain, Revise or Eliminate? Presented by Jim Foyt, CPA of EBS, LLC & Francis X. Grady, JD of Grady & Associates Moderated by Lee Nunn, CLU, CPAAALU Nonqualified Plans Committee Chair October 9, 2007

  2. Historical Accounting for Split Dollar The Problem Disagreement between auditors and employers EITF: Diversity in Split Dollar Accounting Comment Letters EITF: Split Dollar

  3. EITF: Split Dollar • EITF Decision • Employers must account for post-retirement split-dollar plans • Effective for fiscal years beginning after December 15, 2007 • Liability to be accounted for based on the terms of the agreement using FAS 106 or APB Opinion No. 12, as applicable. • EITF 06-4, September 20, 2006 • EITF 06-10, March 28, 2007

  4. EITF: Split Dollar • The Nature of the Liability • Employer agrees to maintain a life insurance policy • Employer has agreed to provide the employee with a death benefit

  5. EITF: Split Dollar • All available evidence should be considered to determine the substance of the arrangement. • If the employer agrees to provide a death benefit to the employee even in the event of default by the insurance company, then the promise made to the employee is to provide a post-retirement death benefit. • If the amount of the death benefit is not explicitly tied to an insurance policy, then the amount of the post-retirement benefit should also be the amount of the death benefit promised to the employee. • If the terms of the arrangement are such that the employer has no obligation to the employee upon default of the insurance company, then the benefit is a promise to maintain a life insurance policy during the employee’s retirement.

  6. EITF: Split Dollar • Calculating the Liability • No Authoritative Examples are available • Professional Judgment Required • Calculation Assumptions • Marketplace Practices

  7. EITF: Split Dollar • Recording the Liability • Cumulative-effect Adjustment to Retained Earnings • Retrospective Application to all Prior Periods • Ongoing Accounting • Ultimate Impact of EITF – Timing Difference • No Tax Benefit from Post Retirement Liability

  8. EITF: Split Dollar • Bank Regulatory Considerations • Capital Reduction • BOLI Risk Management • Risk Model Validation

  9. EITF: Split Dollar • Planning Ideas and Alternatives • Identify and Quantify the Liability • First calculate the EITF accounting impact • Review calculations with Employer’s CPA • Amend Plans • Terminate Plan • Alternative Plans • Federal Tax Considerations

  10. Questions and Answers To ask a question press “0” followed by a “1” and wait for operator assistance.

  11. Webinar SurveyPlease print out and fax back to AALU at 703-641-9885 Please Complete the following: 1= Not at all useful, 5= Very useful 1. Overall rating of webinar format 1 2 3 4 5 2. Overall rating of presentation content 1 2 3 4 5 3. Rating of Mr. Foyt’s presentation 1 2 3 4 5 4. Rating of Mr. Grady’s presentation 1 2 3 4 5 5. Pre-conference instructions 1 2 3 4 5 6. Ease of Registration 1 2 3 4 5 7. Dial- in service 1 2 3 4 5 8. Webinar service and PowerPoint 1 2 3 4 5 9. Where did you listen to today’s webinar? __ Home __ Office __ Car __ Other 10. How many people from your office also participated in the webinar? __1-2 __3-4 __5-6 __7 or more 11. Comments/ Suggestions for future educational webinars ____________________________________________________________________________________________________________________________________________________________________________________________ 12. Suggested topics/ speakers for future educational webinars ____________________________________________________________________________________________________________________________________________________________________________________________

  12. Reference Material • Recent AALU Washington Reports on Split-Dollar • Washington Report 07-74 , Interplay Between New Split-Dollar Accounting Requirements and Bank Regulatory Capital Requirements • Washington Report 07-54, Final Abstract of EITF Issue 06-10 Prescribes Financial Accounting for Collateral Assignment Split-Dollar Arrangements Providing Post-Retirement Benefits • Washington Report 06-144, Analysis of EITF Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar

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