According to a news release, Self-Owned Life and Retirement (S.O.L.A.R.) Insurance Arrangements offer a life insurance policy to key employees funded through employer contributions, after-tax employee contributions, or a combination of both. This arrangement can help reduce the risk to the employer while providing more flexibility for the employee, ING said.
Key to the new arrangement is the idea that the employee may borrow from a life insurance policy to help pay the employee’s current income taxes.
“Some traditional nonqualified plans simply aren’t getting the job done in today’s environment. Employers want to get rid of the complexity associated with these plans and employees want more control over their retirement benefits,” said Kurt Fasen, senior vice president and head of Insurance Sales Support, ING, in the announcement. “S.O.L.A.R. Insurance Arrangements are simpler for the employer, and it puts the insurance policy in the hands of the employee.”
ING explains that for many years, the preferred method of rewarding key employees was through nonqualified deferred compensation funded with life insurance, but these plans have a potential negative impact on the corporate balance sheet since the employer must record the promised benefit as a current liability. Insurance companies responded to this need by developing specialized life insurance products for corporate-owned life insurance (COLI).
ING has introduced S.O.L.A.R. Insurance Arrangements to aid employers retention of key employees by helping to fund supplemental retirement income with a cash-value life insurance policy. While COLI-specific products were developed for nonqualified plans, ING has developed a new product for S.O.L.A.R. Insurance Arrangements, ING’s Indexed Universal Life-Global Plus (ING IUL-Global Plus), issued by Security Life of Denver Insurance Company.
Similar to ING Indexed Universal Life-Global launched in 2010, the product offers policy holders valuable death-benefit protection and the choice of a fixed strategy or an indexed strategy. The indexed strategy credits interest based upon a formula that uses a portion of the two better-performing of three indexes (S&P 500 Index, the EuroSTOXX 50 Index, and the Hang Seng Index) looking back over a five-year period.However, the new ING IUL-Global Plus also offers a “select loan” feature that allows the policy owner the ability to take a loan (with a fixed interest rate charge of 6% per year) from the policy that could be used to pay the income taxes owed on the compensation paid by the employer. The loan amount remains in the fixed or indexed strategy elected by the policy owner. Because the amount borrowed remains in the crediting strategy, the cost of borrowing for taxes may be partially or wholly offset by the amount of interest credited to the account.