Focus 10 Life® – Group Term Carveout Case Study
Case Study: New Focus 10 Life® Plan
Type of Employer: Private Equity Firm
Purpose of Insurance: Group Term Carveout
- A Private Equity Firm with 300+ employees, had a Group Term life plan that provided a benefit of 2 times salary, to a maximum of $600,000. The prospect was concerned about:
- Reverse discrimination: About half of the executives (salary > $300K) were impacted by the cap. In other words, their benefit was less than 2 times salary.
- Age Based Benefit Reductions: The plan reduced the benefit by 1/3 at age 65 and ½ at age 70. One executive already had a reduced benefit and others would in a few years.
- They were interested in providing a bigger, and possibly better, benefit for 65 executives, but wanted to avoid putting the team through medical exams.
Recommended Focus 10 Life® Plan Design:
- The producer proposed a Group Term Carveout for the 65 executives, using Focus 10 Life®
- The Focus 10 Life® benefit formula was 2 times salary minus $50,000, with no benefit cap.
- The executives would remain in the Group Term life plan, with a $50,000 benefit. The producer advised that this amount would be exempt from taxation to the executive.
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This plan design met all the Simplified Issue Guidelines and readily secured approval to be implemented.
- The executives were covered under a new plan that provided a full 2 times salary benefit.
- The new plan eliminated “age based benefit reductions”. This immediately impacted one executive, whose full benefit was restored, and others over the next few years.
- And there was an additional unexpected benefit – lower taxable income for the executives! Focus 10 Life® is taxed differently than Group Term Life*. The producer demonstrated that over the next 10 years, taxable income for executive life insurance coverage will decrease by an average of 32%.
- Each executive secured a 10 year, guaranteed level premium individual term life policy.
- Readily portable at termination or retirement.
- Convertible to permanent insurance to continue coverage beyond 10 years on a cost-effective basis.
*FOCUS 10 LIFE, Inc. cannot provide legal or tax advice. Clients should seek this information from their own advisors.
Focus 10 Life® level term life insurance (Form 3011) and (Form 3011 F10 FL) are issued by Ameritas Life Insurance Corp. in most states. In New York, Focus 10 Life (Form 5011) is issued by Ameritas Life Insurance Corp. of New York.
Focus 10 Life, Inc. is an independent third-party administrator and is not affiliated with Ameritas®.
This case study is designed to provide accurate and authoritative information. Neither FOCUS 10 LIFE, INC., nor Ameritas® intend to, or are engaged in, rendering legal, accounting, or tax advice. If tax or other legal advice or other expert assistance is required, the services of a competent professional should be sought.
The accuracy of the information cannot be guaranteed. Laws and regulations change frequently, and are subject to differing legal interpretations. Neither the presenter, Focus 10 Life, Inc., nor Ameritas® shall be liable for any loss or damage caused, or alleged to have been caused, by the use of or reliance upon this presentation.
This information is provided by Ameritas®, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to, Ameritas Life Insurance Corp., Ameritas Life Insurance Corp. of New York and Ameritas Investment Corp., member FINRA/SIPC. Ameritas Life Insurance Corp. is not licensed in New York. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas®, visit ameritas.com.
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