Executive benefits

Employers can use a variety of approaches to meet executive benefit needs, but permanent life insurance may be a preferred funding vehicle because:

  • The beneficiary — either the corporation or the employee’s survivor — receives the policy’s cash value and coverage amount income tax-free.
  • Death benefits can be used to fund other cash flow needs.
  • All investment earnings grow income tax-deferred inside the program.
  • Money can be withdrawn before age 59-1/2 without an IRS penalty and without a surrender charge.
  • In a variable policy, money can be moved among investment subaccounts without creating a taxable event.
  • All premiums paid — including those which pay for current life insurance protection each year — become part of the policy’s cost basis when determining the taxable amount of any future withdrawal.
  • Assets may be protected from corporate or personal creditors.

We use permanent life insurance to provide assistance to corporations and partnerships in three key areas:

  1. Replacing an existing executive plan.
  2. Providing corporate-owned or partnership-mandated plans.
  3. Setting up voluntary executive carve-out plans.

Variable Group Universal Life (VGUL) offers flexibility in executive programs

We were one of the first companies to offer a variable group life insurance product and remain one of a handful of companies with experience in implementing and administering VGUL-funded executive plans.

VGUL is an ideal product for employers with the need to fund future liabilities or reward highly compensated executives. VGUL adds flexibility to a total compensation package through advantages like these:

  • Combines life insurance and investment options in one product.
  • Premiums and death benefit can be changed to suit changing circumstances.
  • Potential for greater return than with a fixed return product1.
  • A Guaranteed Account option can be offered to provide a minimum rate of interest and guarantee of principal4.
  • A range of investment options meets different risk tolerance profiles2.
  • Contributions to the investment account can be made through payroll deduction, partnership or bonus distributions or in lump sums.
  • Accumulated assets grow income tax-deferred and can be accessed by loan or withdrawal3.
  • Assets transfer to beneficiary income tax-free.
  • Coverage can be continued to age 90 if executives leave the group or retire.
  • Transfers among investment subaccounts do not create a taxable event.
  • Coverage and investment allocations can be managed through a secure online account.

1 Since it is primary an insurance product, there are fees and expenses associated with owning a VGUL policy, such as management fees, fund expenses, distribution fees and mortality and expense charges.

2Investments in the variable subaccounts will fluctuate, and when redeemed may be worth more or less than originally invested.

3Loans and withdrawals will reduce both the policy cash value and death benefit.

4The guarantees for the General Account are based on the financial strength and claims paying ability of the issuing insurance company, which are important; however, they do not have any bearing on the performance of the investment options.

For innovative ideas on using group life insurance to structure or fund executive benefits programs, contact your regional group sales manager or Ed Eller, national sales manager, Universal Life products.

» Universal Life: Designed with the future in mind (pdf, 1.73Mb)
» Learn more about VGUL
» View the current VGUL prospectus (pdf, 1.3Mb)

This is a general discussion of the relevant tax laws. It was not intended for nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. This information is provided to support the promotion or marketing of ideas that may benefit a taxpayer. Taxpayers should seek the advice of their own tax and legal advisors regarding any tax and legal issues applicable to the specific fact pattern.

You should consider the investment objectives, risks, charges and expenses of a portfolio and the variable insurance product carefully before investing. The portfolio and variable insurance product prospectuses contain this and other information. You may obtain a copy of the prospectus from your representative. Please read the prospectus carefully before investing.