dyepro9
New Member
- 1
I'm contracted with Anico and licensed in Ohio. Let me know if you have questions.
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American National Contract
- Thread starter CFP83
- Start date
- 711
Is anyone selling DB plans? I see where the marketing materials say small businesses with HCE's but is that really better than a VUL? I know different animals but it is kind of the whole pretax post tax difference in ROTH vs tradional ira's. By the time consensus and actuaries are paid you could buy a good amount of face on a VUL. of course that isn't practical on businesses with a lot of employees but the marketing materials say target small businesses.
- 11,504
Because of the volatility risks inherent in a VUL contract, they aren't (in my opinion) suitable for a primary protection product. The best and most suitable market for VUL sales would be business owners and HCE's who have already maxed out 401k contributions (at least to maximize company matches) and have other life insurance protection.
VULs are not an ERISA plan that have minimum participation requirements. If business owners wanted to contribute to an executive bonus plan, they can do this on a selective (discriminatory) basis.
Of course, to offer a VUL contract, you have to be FINRA licensed and with a B/D.
But with the continuous increasing costs of insurance inherent to all UL contracts, do you want to combine that with the downside volatility of the market and underlying sub-accounts? Also, these sub-accounts have rather high management fees too.
If it were me, I'd look at IUL instead of VUL for that market. No sub-account management fees, no downside volatility, decent upside caps today (about 14%), and because of its safer nature (compared to VUL), more appropriate as a protection and cash accumulation policy.
VULs are not an ERISA plan that have minimum participation requirements. If business owners wanted to contribute to an executive bonus plan, they can do this on a selective (discriminatory) basis.
Of course, to offer a VUL contract, you have to be FINRA licensed and with a B/D.
But with the continuous increasing costs of insurance inherent to all UL contracts, do you want to combine that with the downside volatility of the market and underlying sub-accounts? Also, these sub-accounts have rather high management fees too.
If it were me, I'd look at IUL instead of VUL for that market. No sub-account management fees, no downside volatility, decent upside caps today (about 14%), and because of its safer nature (compared to VUL), more appropriate as a protection and cash accumulation policy.
- 711
Exactly. the most suitable market for VUL, IUL, or UL is high earners, the same as DB plans and the creative DC plans. All the UL products avoid the extra craziness that come with DC and DB plans plus discrimination is allowed. I am just curios if any one is selling DB plans. I would think that a smaller business that wants to keep their employees from getting poached would benefit from a DB plan but if it is just about the owners then it seems like a less than stellar deal.
It is a stellar deal because the money is leaving the business either way. They can give it to the IRS or they can give it to themselves and their employees.
Cash balance plans (which are a DC/DB combination) offer exceptionally high contribution limits and provide for a huge tax deduction to a highly profitable business. They are normally put in place in businesses with few employees (1-15 or so) where the owners are older and earn a lot and the employees are younger and earn much less...think dentists, attorneys, etc.
I get where you're coming from (pay the tax now for tax-free later) but the approach to these business owners focuses just as much on not paying tax today (and if it can increase employee retention, all the better) as it does for retirement planning. Plus, since the VUL, IUL, WL (whatever) stand-alone option is always on the table, you could essentially do both if they have the resources.
- 30,538
I'd say you've got the average street contract @ 80%.
80 is probably the average. The agent schedule is at 70 but that is likely for someone who requires a lot of hand-holding...there are higher schedules than 80 direct with proof of production but the deal you've been offered is solid. Take it.
- 10,806
For a small business owner (small meaning under 10 employees) who has significant income to defer, nothing can beat a DB plan.
You would be able to contribute anywhere from 40%-90% more to the DB plan than you would an after tax VUL (or IUL/WL). The DB plan would also lower the overall tax bracket therefore saving even more money.
Admin charges are not nearly as high as people try to make them out to be.
Maybe $2k-$5kmax to establish the plan. Then usually $1k-$3k per year (depending on TPA, type of plan, & number of participants).
DB plans become burdens when they are pitched to owners who really should have just been in a 401k/profit sharing plan.
But when a business owner is contributing $100k-$200k per year and saving tens of thousands, possibly even hundreds of thousands in taxes; a few thousand in admin fees is nothing. Its all about perspective.
(and its not necessarily HCEs your looking for, its high earning sharehlders)
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- 711
Well thank you. I learned something there. Now I am ready for about 100 of those types of prospects to walk through the door!
Do you prefer the tradional DB or the insured DB for those types of clients? I find it hard to compare these plans but when one is in such a high tax bracket it seems like the plan that lowers the taxable income the most should win.
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