Bank-Owned Life Insurance (BOLI)
Enhance Your Bank’s Investment and Retention
BOLI offers a foundational strategy as a powerful asset to offset the expense of benefits plans through the income it generates.
BOLI Attributes
A single premium purchase of a life insurance policy.
Bank is the Payer, Owner, and Beneficiary of the BOLI policy.
100% of the premium is accretive on day one (cash value).
Cash value does not fluctuate (not a mark-to-market asset).
Growth in the policy’s cash value is non-taxable income to the bank.
Death benefit proceeds are received tax-free.
Invested in institutionally priced products resulting in higher yields.
Total policy value available upon surrender request with no surrender charges.
Growth in cash value is other non-interest income on the bank’s financial statements.
Policy income can offset the cost of all employee benefits.
Underwriting Requirements: Based on number of participants, guaranteed issue (GI), or fully underwritten.
Requires positive consent from all participants.
%
of banks have BOLI
%
of banks with $500M-$10B in assets have BOLI
total cash value of BOLI on the books
How BOLI Benefits Your Bank
Senior management retention tool to fund non-qualified benefit plans.
Provides the bank with non-interest income.
Tax-advantaged yield to the bank as the beneficiary of the death benefit.
Death benefit can provide income to offset the loss of key executives.
BOLI product types
Diverse Product Options to Fit Your Bank
General Account
- Underlying policy assets are owned and invested by the life insurance company.
- Policy assets are part of the carrier’s general assets.
- Product pricing and description follow the general rules governing life insurance.
- The vast majority of BOLI held by community banks is a general account.
Separate Account
- Underlying assets are held in a bankruptcy-remote trust.
- Several bank-eligible investment options with a range of risk weight.
- Stable value wrap accounting mechanism available to provide smoothing of mark-to-market.
Hybrid Account
- Underlying assets are held in a bankruptcy-remote trust.
- Several bank-eligible investment options, typically with 100% risk weight.
- In lieu of a stable value wrap, the insurance carrier’s general account provides a guarantee against mark-to-market.
What We Do Best
We generate
- Pre-purchase documentation and support
- Implementation and onboarding services
- Regular policy value reporting
- Independent third-party carrier credit analysis
- Quarterly compliance reporting and carrier due diligence
- Quarterly financial profile analysis of peer group BOLI holdings
- IRS Form 8925 and other tax reporting assistance and support
- Tax reporting assistance and support
- Death claim processing, including weekly SS sweeps
- Implementation and review of BOLI investment policy
- In-person annual performance review
- Assistance with auditors and regulators
We store and retain
- BOLI insurance policies
- Employee consent forms
- Carrier annual reports
- Carrier statements
- Trust documents
- Plan legal agreements
- Plan forms, such as beneficiary
designations and election - Industry updates
- Carrier ratings and financials
- Carrier and insurance news
- Industry and market compliance issues
Understand the risks
Liquidity: A small percentage of the bank’s total assets are involved.
Tax and Insurable Interest Implications: There are no adverse tax implications of the BOLI asset if held to maturity; the bank has a significant insurable interest in the lives of the employees.
Reputation: Insurance can only be purchased on specific individuals associated with the bank, and written permission from those indivisuals is required.
Credit: Only the highest-rated carriers provide BOLI products. The bank is the first position as a creditor in the event of bankruptcy. The bank has the right to direct an IRC 1035 exchange from one carrier to another (in the event of a credit downgrade or carrier non-performance) without creating a taxable event.
Interest Rate: Carrier resets the interest rate each quater or year depending on the product’s portfolio investment return and current interest rate environement.
Compliance: The BOLI transaction complies with the Interagency Statement on the Purchase and Risk Management of Life Insurance
Price: Assumed by carriers, the bank’s investment in BOLI is always held and accounted for at current book value.
Proprietary Solutions
Solutions that Complement BOLI
Lifetime Income Non-Qualified Solutions
Future-proof retirement with secure, lifelong income that cannot be outlived.
Newcleus’ Titanium Benefit Plan
A revolutionary deferred comp alternative offering tax-free income, unlike traditional taxable plans.
Supplemental Executive Retirement Plans
Custom SERPs boost retention, align goals, and support non-traditional life events.
Elevate Your Benefits with BOLI
Connect with one of our expert BOLI advisers and utilize Bank-Owned Life Insurance to transform your financial benefits strategy.
