CUNA Mutual Group: BOLI is alternative way to fund benefits

CUNAMutualGroup_Logo_VT_4CBusiness-owned life insurance is a product that offers expanded investment choices and a competitive, consistent yield with strong crediting rate guarantees.

According to CUNA Mutual Group, the product also allows the potential income earned to offset and recover expenses of employee benefits programs. Additionally, BOLI could be a key component of a credit union’s compensation and benefits programs to help attract and retain top talent.

BOLI is a type of insurance policy taken out on a group of key executives, with a goal of building cash value. If a credit union purchases general account BOLI, the carrier invests the premium. The carrier looks at its investment yield in the general account and, on an annual basis typically, gives the credit unions a gross crediting rate based on the actual return in that general account.

BOLI can be thought of like taking out a $1 million loan for working capital – except it comes with a competitive, consistent yield and strong credit rating guarantee.

According to CUNA Mutual Group, BOLI benefits credit unions for the following reasons:

  • pre-funding can help soften the blow if health care expenses continue to rise;
  • it can help diversify a credit union’s overall investment portfolio;
  • it may establish or enhance a charitable giving program;
  • fees and costs are embedded into net returns – there are no separate investment fees; and
  • it is a low-risk and low-cost way to generate additional revenue.

“In a declining interest-rate environment, BOLI can be a powerful investment tool,” says John Pesh, executive benefits director for CUNA Mutual Group. “The carriers have mature portfolios with locked-in long-term yields, so BOLI delivers higher rates with minimal market risk.”

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