- Hey everybody, it's Randy Pierson
here with another episode of "Selling Life & Annuities."
I wanna welcome you,
and I wanna introduce one of the newest members of our team,
Ray Parman, our Life and Annuity RVP.
And today we're gonna be talking
about split dollar insurance.
I know it sounds like a complicated issue,
but we're gonna try to make it simple for you.
Stay tuned.
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All right, Ray, split dollar, right?
I've been in the business for 30 or 35 years,
and it's one of those subjects
that when I am out talking to agents,
and I mention split dollar,
they go, "Oh, I know nothing about the split dollar".
You know let's try to keep it simple.
How does split dollar work and why is it advantageous
in a business owner, selling situation?
- Sure, well, split dollar's really an incentive plan
that a business can put together for their key employees
to basically reward, retain, and recruit employees,
and to make that business of itself an even more competitive
or competitor I should say, on their market,
by bringing in talent, and keeping 'em there
- And the product that we're using here,
I mean, I'll assume,
because we're in the business of promoting, marketing,
helping agents sell life and annuities
as a life insurance product.
- That is correct, yeah,
we're looking at permanent life insurance in this place.
- All right, fantastic,
and so what are the advantages to the employer?
I mean what does the employer really get out of this?
- So by implementing a split dollar plan,
the advantages to the employer, they get to be selective,
they get to pick and choose who participates
in this split dollar agreement,
and again, we're probably focusing on the key employees
of a particular business.
It's actually a very easy to implement plan,
the cash value from the life insurance actually sits
on the business's balance sheet
so it shores up the balance sheet for the business.
and also as we kind of discussed earlier,
it really contributes to employee productivity
and loyalty too.
- So it sounds like, I mean I think what I sense,
what I got out of that was to some degree was that unlike,
for example, a qualified retirement plan,
a business owner can be selective
in this type of an arrangement.
So what are the advantages
to the employee in these types of arrangements?
- Yeah, so for the employee,
what they're gonna come away with
is a significantly larger death benefit
or a life insurance policy
that they can name their loved ones,
or the beneficiary of their choice,
so they're gonna have that, it's very cost-effective,
and what I mean by that is now the business
is going to pay the premium,
but the employee is going to simply pay the income tax
on a lower term rate
for that permanent life insurance coverage too,
so those are two primary advantages,
and then I'd say there's some versatility to it too,
because a split dollar is great bringing somebody in,
but it also can be parlayed
into maybe a non-qualified deferred comp
play later on in their careers,
they are moving towards retirement.
- Okay, so I really liked this, right,
split dollars' a fantastic arrangement in my mind,
because there's advantages to the business owner,
and the business, while also providing some personal benefit
to those employees.
Let's talk a little bit about establishing the plan,
I mean, how do we put one of these plans together?
- Absolutely, and again it's really straight forward,
I mean, it's really identifying who you want
to be participating in that split dollar plan,
so again, we're looking at key employees most likely,
they simply go through the insurance underwriting process,
and at the end of the day,
you just write up the split dollar arrangement
that suits the needs of the business owner,
and also of the employee, and off you go.
- So who puts that arrangement,
who puts that document together?
- Oftentimes it's gonna be a CPA
or an attorney that can help out with that.
- So it's not something that the advisor has to do,
although we can provide them with specimen documents,
and some samples, and things like that,
but we're not creating the document,
we're providing the insurance piece.
- Correct, yip.
- So speaking of the insurance piece,
then what do one of these plans typically cost?
I mean what are the costs involved?
- Yeah, so there's always a cost to everything,
isn't there (laughs)? - Absolutely.
- So the main cost is gonna be on the business owner's,
or the employer's books there,
but that's gonna be further defined
by the number of employees in the plan,
the desired death benefit,
and the type of product that we're actually gonna fund this
with too, so the main brunt of the cost
is gonna go to the employer,
but again, the advantage to the employee
is the fact that they are simply paying
that nominal income tax on that smaller term rate
that they use to calculate that.
- Cost of the insurance,
so it sounds like the cost of the plan,
the cost to the employer,
and implementing one of these strategies
is really up to them, could be big or small,
it depends on how much they wanna put into it
to help retain that key employee,
and put something together that's gonna benefit them,
as well as the employee.
So briefly this video is coming to an end,
but how can we help advisors
get into this business owner insurance planning space.
- Absolutely, you know we're here to help,
we're here for phone calls,
but to move the ball forward for somebody,
we have a business training,
we have business fact-finders,,
everything that somebody would want to use
to help educate themselves,
even educate their clients,
and collect the appropriate information,
they can bring that into us,
and we can help analyze that too.
- All right fantastic, so if you're an agent out there
and you'd like to learn more about how to get
into the business owner insurance planning space,
make sure you reach out to Ray,
he can get a fact-finder in your hands.
He can also get you a guide on migrating
into the business owner insurance arena.
But with that, we must call this episode
of "Selling Life & Annuities,"
and I wanna thank Ray for participating today
I'm Randy Pierson, we here at Gordon Marketing
are ready to earn your life and annuity business,
stay tuned every Tuesday for a new episode
of "Selling Life & Annuities."
We'll see you then.
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