Protecting the wealth that executives have worked a lifetime to earn and accumulate and reducing the risk associated with untimely life changing events are critical concerns of many executives. Marsh & McLennan Agency guides you through the host of supplemental wealth protection options available to create a plan that best meets the needs of your executives. Supplemental plans provide executives protection against an untimely death, disability, medical or long-term care need at the same benefit level - as a multiple of pay - as the at-large employee population. These plans “fill the gap” inherent in the broad based group plan due to flat dollar benefit maximums.
The following are tax effective wealth protection solutions that our clients offer to round out the executive total rewards package for attracting, retaining and motivating their executive and senior management teams.
Long Term Care Funding
Long Term Care solutions can be offered either on a voluntary or employer funded basis. These programs are very tax effective for both the organization and the executive and serve as a component in the strategy to help executives meet their personal wealth accumulation and retirement planning goals by providing that element of wealth protection. Accessing these plans through an employer program extends premium discounts and underwriting concessions to the executive population unavailable in the retail market.
Executives often reduce their pre-tax 401(k)/403(b) plan contributions and redirect the savings to fund their Long Term Care plan as part of their personal retirement strategy.
Executive Supplemental Disability Income (DI) Plans
Supplemental Disability Income plans help executives “fill the gap” between the targeted income replacement rate (e.g., 60% of pay) and the organization’s group Long Term Disability (LTD) plan’s monthly dollar limit (e.g., $10,000/month) placing the executive’s benefit relative to pay on par with the at-large employee population. In general, without a supplemental plan, executive’s can expect that group LTD plans cover between 30% and 45% of their cash compensation, leaving dependents at risk of a significant lifestyle change in the event of a pre-retirement disability event. Many base plans do not cover variable pay (bonus and/or commission income), leaving executives with an even larger gap should they become disabled.
Accessing these plans through an employer program extends premium discounts and underwriting concessions to the executive population as well as other employees who may qualify if participation requirements are met. These discounts and concessions are not available in the retail market.
The cost of these plans varies based on the executives’ demographic profile. Marsh & McLennan Agency will obtain premium and benefit information from multiple carriers for clients to select a plan that best meets their needs. Plans can be provided on a voluntary or non-contributory basis, or a combination.
Executive Life Insurance
An Executive Life Insurance plan provides highly compensated employees with the same benefit formula (as a multiple of pay) available to other employees covered under the group plan without increasing the plan maximums and premium rates of the group life plan. When cash value life insurance is used to help protect against an untimely death, an executive plan doubles as a source of supplemental retirement income should they survive to retirement. Cash values under permanent life insurance programs grow tax deferred and tax free distributions can be accessed upon retirement. Executives can choose from fixed investment rate, indexed or variable (mutual fund type investments) products.