If it makes sense to include an insured pre-retirement death benefit
in a Cash Balance or Defined Benefit Plan after considering these points, it is important that a plan sponsor work with professionals
that are experienced in:


  • Determining maximum levels of life insurance that are considered incidental to retirement benefits.

  • Coordinating the inclusion of life insurance with the overall combined plan design to meet the plan sponsors goals

  • Facilitating/coordinating the installation of the life insurance policies

  • Communicating and monitoring the overall plan design and life insurance considerations





Cash Balance Insurance Services

Providing for an insured pre-retirement death benefit in a Cash Balance Plan makes sense for certain plan sponsors. Doing so may enable a plan sponsor to increase their tax deductible contributions and provide for a tax free death benefit to plan participants.


The potential benefits and considerations of including an insured
pre-retirement death benefit in a Cash Balance Plan include:


  • Provides for a method of obtaining Cash Value Life Insurance through tax deductible contributions to plan. 

  • Provides for a higher tax-deductible contribution limit
    over the life of the plan.

  • Provides for tax-free insurance proceeds to a beneficiary
    in case of death.

  • Provides for self-completion of family retirement planning
    in event of premature death.

  • Can provide for additional retirement benefits through tax-free
    loan and withdrawals from the life insurance policy in retirement

  • Often makes sense to remove the policy from the plan and
    change the owner from the plan to the individual insured after
    the scheduled premiums are made.

  • Once removed from the pension plan, the policy can either
    provide for:

    • Tax-free retirement income through policy distributions

    • Potential Estate Tax-free insurance proceeds

  • Provides tax diversification of sources of retirement income
    if ultimately removed from plan.

  • Must provide insurance to all plan participants to satisfy benefits, rights and features IRS requirements. If employee is uninsurable
    or rated, level of insurance can be equivalent to that purchasable by premium for a standard class.

  • Generally underwriting requirement for benefits for highly compensated employees. Often possible to have simplified underwriting requirement for rank and file participants
    (depending upon total death benefit levels).


Schedule a time to talk with an Actuary:


134 East Main Street

New Albany, Ohio 43054

Phone and Fax: (800) 805-9538

Email: info@mchenry-advisers.com


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