Benefit Liability Funding

Life Insurance (COLI/BOLI) | Annuities & Settlements

Financing benefit liabilities, such as nonqualified plans, allows companies advanced options to balance the rising costs of their unique benefit plans with a greater return on their investment while effectively planning for—and minimizing the impact of—benefit distribution. Shareholder and accounting management practices make it increasingly beneficial to fund plans in today’s market. With many ways to establish an informal funding mechanism for nonqualified benefit liabilities, funding options are frequently combined to provide the best outcome for the specific needs of a corporate client. MBS Financial provides expertise and analysis to facilitate an appropriate informal funding decision. Below are a few popular informal funding concepts.

Corporate owned life insurance (COLI) and bank owned life insurance (BOLI) with cash value build-up are often selected to target matching plan liabilities. COLI and BOLI buyers benefit from annual reviews that evaluate their life insurance policies for appropriate strategy, structure, pricing and competitiveness. Many times this doesn’t happen and corporate buyers are hard pressed to find an expert committed to ongoing policy review. MBS Financial provides COLI audits to analyze carrier strength, pricing efficiency, and expenses, as well as compare investment management and alternatives. The corporate buyer will receive a full analysis of their current product(s) and strategy effectiveness, along with recommendations and alternatives.

Annuities often complement an investment plan by providing a stream of steady income for an employer or executive. Investments in an annuity can be made in lump sums or over a period of time, and payments can start immediately or at a later date. Offering a range of options, annuities can also be used for tax-free income, customized, continual payments for the length of the claimant’s life, payments to a named beneficiary, or as settlements for corporate plans.

Other informal funding options may include mutual fund investments or total return swaps. Mutual funds create the option to fund a plan with a matching asset that will grow over time to offset the payment obligation. Total return swaps allow companies to offset P&L exposure without committing an asset to the plan/trust. They can also be used in conjunction with an existing asset to improve financial statement accounting geography within operating income/expense.

The availability of so many options for financing benefit liabilities enables companies to offer more competitive benefit plans while efficiently planning for distribution.