Category Archives: Investing and fiduciary requirements

Retirement Plan Compliance Calendar

June 30- If you have plan assets invested in Employer Securites, you must file Form 11-K. 

July 28- Summary of Material Modification for changes in infromation made during the prior year must be mailed to plan participants.

July 31- Form 5500 Annual Return of Employee Benefit Plan must be filed.  If you haven’t gotten your information back to your TPA do it TODAY!  Otherwise a Form 5558 extension will have to be filed.

Your annual Social Security Benefit report has dissappeared

As a means of cutting costs, the Social Security Admistration has eliminated the annual mailing of retirement estimates to future Social Security recipients.   In the past, these statements were mailed out three months prior to your birthday, if you had worked enough hours to qualify.  Now to obtain this information you must go online to the “Retirement Estimator” on the social security website at  This online tool allows the user to plug in different variables, such as a change in future earnings or your planned retirement age, to produce a more accurate estimate of retirement benefits.

I logged in today and looked at mine.  You will need some obvious information to establish your identity.  It will then give you your anticipated benefits at age 62, your normal retirement age, and age 70.  They also give you helpful links to other information that you might be interested in.  Quick and easy.

Executive Bonus Plans: A Fresh Look at a Classic

Published 6/17/2011 
As we move into the second decade of the new millennium, we find ourselves in a time of great change.  One thing that has not changed is that employers still need to find ways to recruit, reward and retain key employees in their businesses.  Executive bonus plans remain a simple and cost effective tool for employee retention. Executive Bonus Plans, also referred to as “Section 162 Bonus Plans”, have been around a long time.  The title refers to the part of the IRS Code that allows for bonus compensation to employees to be deductible to the employer as long as that compensation is considered reasonable  (I.R.C. § 162(a)(1)).—-000-.html

Many other traditional methods of providing non-qualified retirement savings or benefits to key employees have become increasingly complex to implement. The advent of the 409(A) regulations have put strict rules in place as to plan design, and created heavy penalties for the participants should the plan not meet those guidelines.—A000-.html

Employers are wary of the potential for lawsuits should they fail to meet all the necessary guidelines of 409(A).  In addition, in our current economic climate, executives are increasingly wary of tying their retirement funds to the financial viability, or legal liabilities, of their employer.  A requirement of traditional nonqualified plans is that they are unfunded, and that any funds supporting the plan are subject to the general creditors of the employer. This can appear as a great risk to the employee.

Executive Bonus Plans are experiencing a renaissance: they provide a way for a key employee to purchase life insurance using employer dollars.  Generally, the employer pays the premium and adds the bonus to the employee’s W2 income.  Alternatively, the employer could bonus the employee cash and the employee would then use the after tax dollars to pay the premiums. 

The life insurance can provide death benefit protection to the executive’s family, and it can also be funded to provide tax advantaged retirement income as well. As the life insurance is employee owned, the creditor risk of a traditional nonqualified plan is avoided.  There are no required distributions at age 70 ½ as there are for IRAs or other qualified plans, and there are no penalties for removing funds from the life insurance policy prior to age 59 ½. 

Executive Bonus Plans are very flexible.  There are no participation requirements – the employer can fully discriminate as to whom the plan is offered. Incentives, such as sales goals or company profitability, can be built into the arrangement if desired.  Restrictions can be placed on the plan, requiring repayment of some or all of the bonuses, if the key executive leaves prior to a designated amount of time.

So, how does it work?

  1. First the employer and executive agree that the bonus plan is an important part of his or her compensation package.
  2. The executive purchases a life insurance policy.
  3. The employer makes premium payments on the policy and the executive pays tax on the bonuses as ordinary income. 
  4. The executive can receive income through withdrawals and loans from the insurance policy’s surrender values. [i] If  the executive dies at or before retirement, income tax free death benefit proceeds are paid to his or her beneficiaries.[ii]

Where does the flexibility come in?

The actual bonus amount, whether it is a single bonus or a double bonus, any restrictions on the bonus, or promises of increases to the bonus, are all open to negotiation.  If a single bonus is used, the employee can choose to either have the full amount put into the policy, or just the net amount after paying the appropriate taxes.  If the employer desires, the employer can gross up the bonus, creating a “double bonus” which provides enough money to pay the taxes plus the premium dollars.

When it comes to the life insurance policy, the executive can purchase the contract that best meets his or her needs.  While this will often be a policy for cash accumulation, in order to provide projected income at retirement, in some cases the executive will be more interested in the death benefit.  Either option is open in this kind of plan.

Are there legal documents needed?  The answer is “maybe”.

Some employers will want to put the plan into writing in order to avoid confusion as to the goals of the plan and exactly what is being promised.
Some employers will also want to put a restriction on the plan.  These are commonly called Restricted Executive Bonus Arrangements (REBAs).  Language is usually put into an employment agreement specifying how long the executive needs to stay with the firm and what will occur if the executive leaves early. In addition, some life insurance carriers have a form that can be used in conjunction with the agreement to limit the executive’s ownership rights.  The limitation does not grant rights to the employer, but limits the executive’s rights to surrender the policy while the agreement is in place.

Some broker dealers will require evidence that there is an actual plan in place.  This can often be satisfied by a Corporate Resolution.  Many life insurance carriers can provide sample legal documents which can reduce the employer’s out of pocket expenses to implement the plan.

The Executive Bonus Plan is a classic design that provides protection for the family during the executive’s income producing years, and the ability to increase retirement savings as well.  It is simple to implement and administer, and can be an excellent tool in retaining key employees.

Pamela Duncan, CLU, ChFC, is a senior executive benefit specialist with the Insurance Sales Support Team of ING Americas – U.S. Financial Services, Windsor, Conn.

Empire Blue Cross removing Total Blue options




As previously communicated, Empire will begin withdrawing Small Group (CDHP)  Total Blue Options 7 and 8 from the market for new business and upon existing groups’ renewal dates, beginning October 1, 2011.  Empire will begin mailing group and member communications this month to fulfill the pre-renewal notification requirement.

Small Groups will have the option of purchasing any Empire plan offered in the small group market upon their renewal. Otherwise, members who are enrolled on Empire Total Blue Option 7 will be migrated to Empire Total Blue Option 6 while members enrolled on Empire Total Blue Option 8 will be migrated to Empire Total Blue Option 5.

Please refer to the attached chart to view the key differences between these options.

Also available are samples of the Group and Member notification letters that we will be mailing to those enrolled on Empire Total Blue Options 7 and 8:

Empire Total Blue Option 7 Group Letter 
Empire Total Blue Option 8 Group Letter
Empire Total Blue Options 7 & 8 Member Letter

Reminder:  Empire Total Blue Options 7 and 8 are available for purchase and renewal prior to October 1st, 2011 effective dates.  However, they are not being actively marketed for new business and for groups renewing July 1st and after due to pending withdrawals.

NOTE: Empire Total Blue Options 7 and 8 will not be available for sale for new business or renewing business beginning 10/1 and beyond.

AHIP: Health Savings Account Enrollment Reaches 11.4 Million

WASHINGTON, D.C. – More than 11.4 million Americans are covered by Health Savings Account (HSA)-eligible insurance plans, a more than 14 percent increase since last year, according to a new census released today by America’s Health Insurance Plans (AHIP) finds. 

Health Savings Accounts were authorized starting in January 2004.  Since then, AHIP has conducted an annual census of health plans participating in the HSA health plan market. This year’s census shows that enrollment in HSA plans has nearly doubled over the last three years, from 6.1 million enrollees in January 2008 to 11.4 million in January 2011.

“HSA plans continue to be a vital source of affordable coverage for millions of families and employers across the country,” said Karen Ignagni, President and CEO of AHIP.

 Key findings from the census include:

  • As of January 2011, approximately 11.4 million people were covered by HSA plans, an increase of more than 14 percent since last year.
  • Between January 2010 and January 2011, the fastest growing market for HSA plans was for large-group coverage, which rose by 26 percent, followed by individual market coverage, which grew by 15 percent.
  • In the individual market, 2.4 million covered lives are enrolled in HSA plans, while approximately 2.8 million lives were enrolled in HSA coverage in the small-group market and over 6.3 million lives were covered in the large-group market.
  • States with the highest levels of HSA enrollment were California (1,073,319 enrollees), Texas (844,832 enrollees), Ohio (728,868 enrollees), Illinois (690,509 enrollees), Florida (656,243 enrollees) and Minnesota (507,307 enrollees).

AHIP is reaching out to policymakers on both sides of the aisle about ways to mitigate the potential unintended consequences of provisions in the new health care reform law that could disrupt or limit the availability of coverage through HSA plans, including: 

  • Restrictions on Over-the-Counter Medications: Starting this year, HSA funds can no longer be used to purchase over-the-counter (OTC) medications without a prescription.  This requirement reduces consumers’ access to common OTC drugs, such as allergy medications, and instead provides an incentive to use higher-cost prescription drug alternatives. 
  • Medical Loss Ratio: The medical loss ratio (MLR) regulation is particularly problematic for HSA-eligible plans.  By Congressional design, these plans are intended to provide consumers with a high-deductible, low-premium coverage option along with the ability so save for health care expenses through an HSA.  While these plans typically have lower benefit costs, they are not necessarily less costly to administer on a per-enrollee basis, and, as a result, naturally have lower loss ratios.  Policymakers should recognize the unique nature of HSA plans to preserve consumers’ access to this important coverage option. 
  • Minimum Actuarial Value Requirement: Effective in 2014, insurance coverage sold in the individual and small-group markets must meet certain minimum actuarial values for each level of coverage provided: bronze, silver, gold, and platinum.  The lowest level, bronze, must have a minimum 60 percent actuarial value, which is the dollar value of the average expected benefits paid out by the plan.  The ACA directs the HHS Secretary to establish the process for determining actuarial values and states that the Secretary “may” include the amount of the annual employer HSA contributions toward the actuarial value calculation.  Including employer HSA contributions in the actuarial value calculation significantly increases the likelihood that HSA plans will meet the minimum requirement and will help ensure consumers continue to have access to the high-quality, affordable coverage they rely on today. 

For the full report and slides, please visit the links below:

Full Report:

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA. - SIPC - Brokercheck