IUL for Employees dilemma

[SamIam]

I sold business owner an IUL Min death max cash value with North American years back and he absolutely loves it. Here is the problem he doesn't offer any retirement benefits to his employees right now but he called me up wanting to do this for his employees where he pays 25% of the premium. My dilemma is let's say after 6 months the employee leaves willing or fired and it's possible they won't be able to afford it and not enough money to support it without the premium being paid in the beginning.

I just don't think this a good idea am I looking at this wrong?

 

[DHK]

For rank and file, I'd look at a voluntary payroll deduction plan, such as what ANICO offers.

Worksite Simplified Issue

But doing a premium sharing arrangement between employer/employee can be good for key employees as an executive benefit program. I'd probably tie it to a golden handcuff provision and/or do some kind of split dollar program.

This isn't really in my "wheelhouse". I know enough to be dangerous. I'm sure @scagnt83 may have some ideas on this as he primarily works with business owners.

 

[scagnt83]

A business owner can install a 401k plan for about $1,500. And if they are making decent money, it is a huge benefit from a tax perspective. Most owners who want a "401k alternative" fall into 2 classes:
1. They dont know any better
2. They dont know any better ... lol

From a mathematical perspective, the 401k will put more money in their pocket and in the employees pocket.

IULs are a disaster waiting to happen in these scenarios for many different reasons.... liquidity, premium commitments, underwriting, & education are just the main reasons.

A 401k keeps things equal. IULs will never be equal among all the employees. That is another big issue.

Also, if recruiting new hires is in any way competitive for their industry, the business NEEDS a 401k Plan. Potential hires want it and in many industries they expect it. If its a decent earning white collar business, then its very likely they have lost potential employees because of no 401k plan.

 

[glgamerica]

Agree 100% with scagnt83 here. I'd add that I don't even think UL's are appropriate for payroll deduction for the vast majority of employees in the workplace.

 

[ATM]

For rank and file, I'd look at a voluntary payroll deduction plan, such as what ANICO offers.

Worksite Simplified Issue

But doing a premium sharing arrangement between employer/employee can be good for key employees as an executive benefit program. I'd probably tie it to a golden handcuff provision and/or do some kind of split dollar program.

This isn't really in my "wheelhouse". I know enough to be dangerous. I'm sure @scagnt83 may have some ideas on this as he primarily works with business owners.

North American will not do a split dollar plan. I've tried.

A split premium arrangement/162 bonus plan is the solution for key employees. For rank and file - no.

 

[FinalExpenseDojo.com]

A business owner can install a 401k plan for about $1,500. And if they are making decent money, it is a huge benefit from a tax perspective. Most owners who want a "401k alternative" fall into 2 classes:
1. They dont know any better
2. They dont know any better ... lol

From a mathematical perspective, the 401k will put more money in their pocket and in the employees pocket.

IULs are a disaster waiting to happen in these scenarios for many different reasons.... liquidity, premium commitments, underwriting, & education are just the main reasons.

A 401k keeps things equal. IULs will never be equal among all the employees. That is another big issue.

Also, if recruiting new hires is in any way competitive for their industry, the business NEEDS a 401k Plan. Potential hires want it and in many industries they expect it. If its a decent earning white collar business, then its very likely they have lost potential employees because of no 401k plan.

Very good post, scagent! Thank you!