Employer sponsored voluntary executive ILI

[Mark Whitelaw]

Employer sponsored voluntary executive access to Institutionally-priced Life Insurance (ILI, COLI, SALI) serving as a 409A complement or supplemental Roth is gaining in popularity. Access is typically restricted to same "select group" as nonqualified deferred comp / 409A plans, or more restricted.

Most institutional COLI issuers now allow their policies sold in this manner, a multi-life after-tax employee funded alternative to pre-tax nonqualified deferred comp funding, but don't provide employer overviews of how to do this on an ERISA compliant manner like they do when buying COLI to informally fund 409A plan.

I'm looking for a reference piece on how discriminatory an employer can be sponsoring a voluntary life insurance benefit and the required documentation.

Also ... some have expressed ERISA concerns since these plans / policies are designed for (1) retirement cash / fund management with (2) supplemental protection as opposed to traditional retail / group voluntary life insurance plans designed for (1) protection with (2) supplemental cash accumulation opportunities.

Would appreciate any opinions on employer regulatory / ERISA exposures sponsoring a voluntary life insurance plan to fund retirement.

[Mark Whitelaw]

I will infer from the lack of response that you agree this is a "grey" area.

As a FYI - during our migration in 2002 from Nonqualified Deferred Comp (today 409A) design and administration to The STAR Plan we tool a different approach - moving the ILI plan sponsor role from the employer to an external ILI administration firm.

So, not a Voluntary Benefit in the traditional / regulatory sense, but a Financial Wellness awareness alternative not available in the employee benefits, executive benefits or retail financial planning world.

Bottom Line - the career and life choices of higher and highly compensated employees opened a different door to access Personal "Parity" Restoration.

To learn more - visit the ValleyViewConsultants.com web site and click "The VVC Story" menu tab - The Evolution of "Parity" Restoration from and "Executive Benefit" to a Personal Planning "Choice".

Feel free to contact me directly with any questions. Have a great holiday.