CORPORATE OWNED LIFE INSURANCE
Corporate Owned Life Insurance (COLI) provides a cost-efficient and effective means for companies to offset rising employee benefit costs, such as supplemental executive retirement, deferred compensation programs, and post-retirement medical obligations.
In a COLI program, a corporation purchases life insurance on a group of key employees. The corporation pays the policy premiums, owns the cash value of the policies and is the designated beneficiary. The corporation must obtain each employee's consent prior to purchasing an insurance policy insuring his or her life, and the employee must be notified about the beneficiary designation and the maximum amount of insurance coverage under the policy on his or her life.
COLI offers the following benefits to employers:
• Can be used to help fund and support deferred compensation and other post-retirement programs
• Potentially offers annual after-tax returns that are higher than the returns earned on other investments
• Earnings derived may come from growth in the account value each year or from life insurance benefits generally payable on an income tax-free basis upon an insured's death
• The growth in a policy's cash value is tax-deferred until accessed via a partial-withdrawal or surrender, if permitted, under the terms of the policy