Insurance can fund retirement; 'POLI' method

Article Abstract:

Non-qualified supplemental executive retirement plans (SERPs) are becoming a popular means of financing law firm partners' retirements, as they are structured to avoid ERISA requirements and have greater flexibility than tax-qualified plans. Coverage is limited to a highly paid executive group and they are not taxed on benefits until receipt. The partnership-owned life insurance (POLI) is one way of financing a SERP. The law firm buys permanent life insurance on plan participants and thus funds its benefit obligations ahead of time, having determined them using an actuarial model.

Usage, Finance, Life insurance, Pension funds, Supplemental executive retirement plans

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Age-based plans yield advantages; new concept

Article Abstract:

The age-weighted defined contribution plan is a new idea in pension benefits which law firms may want to consider. It is sanctioned by Treasury Department rules implemented in 1991 pursuant to IRC 401(a)(4). This plan structure allows greater benefits to be allocated to older or better-paid employees, as opposed to younger or lower-paid ones. This is because Treasury rules allow defined contribution plans to be tested according to benefits provided to employees rather than just according to contributions allocated to participants' accounts.

Innovations, Defined benefit plans

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Cost control is key factor in firms' retirement plans; firms are favoring defined contribution plans, such as profit-sharing and 401(k) programs, as retirement savings vehicles

Article Abstract:

Law firms can control costs while maximizing the retirement income of their partners by having multiple tax-qualified retirement plans. In order to be tax-qualified, such plans must be non-discriminatory. Defined-contribution plans have become more popular than defined benefit plans as they are usually easier to administer and let the employer decide how much to contribute each year. Examples are the profit-sharing and 401(k) plans. The latter also have the popular option of allowing the employees to decide on investments.

United States, Retirement income, Defined contribution plans

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