ING introduces new solution for the growing needs of employers and employees
New life insurance product provides loan feature and may help with supplemental retirement income
The ING Life Companies (ING) are introducing a new solution to an old problem — giving employers a way to recruit key talent by helping key employees prepare for their retirement income needs. The solution is a new concept, dubbed Self-Owned Life and Retirement (S.O.L.A.R.) Insurance Arrangements, which puts a life insurance policy in the hands of key employees funded through employer contributions,* after-tax employee contributions, or a combination of both. This arrangement can help reduce the risk to the employer while providing more flexibility for the employee. Key to the new arrangement is the idea that the employee may borrow from a life insurance policy to help pay the employee’s current income taxes.
“Some traditional nonqualified plans simply aren’t getting the job done in today’s environment. Employers want to get rid of the complexity associated with these plans and employees want more control over their retirement benefits,” says Kurt Fasen, senior vice president and head of Insurance Sales Support, ING. “S.O.L.A.R. Insurance Arrangements are simpler for the employer, and it puts the insurance policy in the hands of the employee.”
A New Paradigm
For many years, the preferred method of rewarding key employees was through nonqualified deferred compensation funded with life insurance. But these plans have a potential negative impact on the corporate balance sheet since the employer must record the promised benefit as a current liability. Insurance companies responded to this need by developing specialized life insurance products for corporate-owned life insurance (“COLI”).
Today, more employers are turning to a paradigm of employee-owned retirement benefits. To meet this new model of planning, ING has introduced S.O.L.A.R. Insurance Arrangements to aid employers retention of key employees by helping to fund supplemental retirement income with a cash-value life insurance policy. While COLI-specific products were developed for nonqualified plans, ING has developed a new product for S.O.L.A.R. Insurance Arrangements, ING’s Indexed Universal Life-Global Plus (ING IUL-Global Plus,) issued by Security Life of Denver Insurance Company.
Similar to ING Indexed Universal Life-Global launched in 2010, the product offers policy holders valuable death-benefit protection and the choice of a fixed strategy or an indexed strategy. The indexed strategy credits interest based upon a formula that uses a portion of the two better-performing of three indexes (S&P 500 Index, the EuroSTOXX 50 Index, and the Hang Seng Index) looking back over a five-year period. However, the new ING IUL-Global Plus also offers a “select loan” feature that allows the policy owner the ability to take a loan (with a fixed interest rate charge of 6% per year) from the policy that could be used to pay the income taxes owed on the compensation paid by the employer. The loan amount remains in the fixed or indexed strategy elected by the policy owner. Because the amount borrowed remains in the crediting strategy, the cost of borrowing for taxes may be partially or wholly offset by the amount of interest credited to the account. **
“Many experts believe that taxes will be higher in the future,” said Randy Kemnitz, ING’s manager of Business Planning and Executive Benefits, Insurance Sales Support. “Using the S.O.L.A.R. Insurance Arrangements allows an employee to let money grow tax-deferred in this life insurance policy and may be able to be withdrawn tax-free and used as a potential source of retirement income. At the same time, it simplifies the arrangement for employers and can increase flexibility for everyone.”
ING is a global financial institution of Dutch origin offering banking, investments, life insurance and retirement services to over 85 million private, corporate and institutional clients in more than 40 countries. With a diverse workforce of about 107,000 people, ING is dedicated to setting the standard in helping our clients manage their financial future.
In the U.S., the ING (NYSE: ING) family of companies offer a comprehensive array of financial services to retail and institutional clients, which includes life insurance, retirement plans, mutual funds, managed accounts, alternative investments, direct banking, institutional investment management, annuities, employee benefits and financial planning. ING holds top-tier rankings in key U.S. markets and serves nearly 30 million customers across the nation. For more information, visit www.ing.com/us.
* Through § 162 bonuses.
** In other words, with Select Loans, the net borrowing costs of having a policy loan varies depending on the index credits earned and/or the credited interest rates on the account value.
ING IUL- Global Plus, policy form series #1182-12/10 and ING IUL-Global, policy form series #1180-12/09 have an equity-indexed feature, varies by state and may not be available in every state. They are issued by Security Life of Denver Insurance Company (Denver, CO), a member of the ING family of companies. Not available in New York. The index cap and index participation rate are subject to change for new index blocks.
All guarantees are based on the financial strength and claims-paying ability of Security Life of Denver Insurance Company, which is solely responsible for the obligation of its own policies.
A portion of the policy’s surrender value may be available as a source of supplemental retirement income through policy loans and withdrawals. Income tax-free policy distributions may be achieved by policy loans or withdrawing to the cost basis (usually premiums paid). This assumes the policy qualifies as life insurance, is not a modified endowment contract and is not lapsed or surrendered with an outstanding loan. Policy loans and withdrawals may reduce or eliminate index credits, generate an income tax liability, reduce available surrender value and reduce the death benefit, or cause the policy to lapse. Additionally, loans may limit the ability to make elections to the Indexed Strategy; if a loan results in amounts being deducted from a block prior to its block maturity date, no elections from the Fixed Strategy to the Indexed Strategy will be processed in the 36 months following the loan. Select Loans have the risk that policy performance may be lower than projected if the amount credited to the account value in the Fixed Strategy and/or Indexed Strategy is less than the fixed 6% interest charged on the policy loan.
The ING Life Companies and their agents and representatives do not give tax or legal advice. This information is general in nature and not comprehensive; the applicable laws change frequently and the strategies suggested may not be suitable for everyone. Each taxpayer should seek advice from his or her tax and legal advisers regarding their individual situation.
These materials are not intended to and cannot be used to avoid tax penalties; and they were prepared to support the promotion or marketing of the matter addressed in this document. Each taxpayer should seek advice from an independent tax adviser.
EURO STOXX 50® Index – An index of blue-chip stocks that are represented by 50 stocks covering the largest sector leaders in the EURO STOXX 50® index. It does not reflect dividends payable on the underlying stocks. The EURO STOXX 50® index is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland, and/or its licensors (“Licensors”), which is used under license. The ING Indexed Universal Life – Global insurance policy is based, in part, on the index and is in no way sponsored, endorsed, sold or promoted by STOXX and its Licensors and neither of the Licensors shall have any liability with respect thereto.
The Hang Seng Index (the “Index”) is published and compiled by Hang Seng Indexes Company Limited pursuant to a license from Hang Seng Data Services Limited. The mark and name “Hang Seng Index” are proprietary to Hang Seng Data Services Limited. Hang Seng Indexes Company Limited and Hang Seng Data Services Limited have agreed to the use of, and reference to, the Index by Security Life of Denver Insurance Company (“Security Life”) in connection with this indexed universal life insurance policy (the “Policy”), BUT NEITHER HANG SENG INDEXES COMPANY LIMITED NOR HANG SENG DATA SERVICES LIMITED WARRANTS OR REPRESENTS OR GUARANTEES TO ANY BROKER OR HOLDER OF THE POLICY OR ANY OTHER PERSON (i) THE ACCURACY OR COMPLETENESS OF THE INDEX AND ITS COMPUTATION OR ANY INFORMATION RELATED THERETO; OR (ii) THE FITNESS OR SUITABILITY FOR ANY PURPOSE OF THE INDEX OR ANY COMPONENT OR DATA COMPRISED IN IT; OR (iii) THE RESULTS WHICH MAY BE OBTAINED BY ANY PERSON FROM THE USE OF THE INDEX OR ANY COMPONENT OR DATA COMPRISED IN IT FOR ANY PURPOSE, AND NO WARRANTY OR REPRESENTATION OR GUARANTEE OF ANY KIND WHATSOEVER RELATING TO THE INDEX IS GIVEN OR MAY BE IMPLIED. The process and basis of computation and compilation of the Index and any of the related formula or formulae, constituent stocks and factors may at any time be changed or altered by Hang Seng Indexes Company Limited without notice. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO RESPONSIBILITY OR LIABILITY IS ACCEPTED BY HANG SENG INDEXES COMPANY LIMITED OR HANG SENG DATA SERVICES LIMITED (i) IN RESPECT OF THE USE OF AND/OR REFERENCE TO THE INDEX BY SECURITY LIFE IN CONNECTION WITH THE POLICY; OR (ii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES OR ERRORS OF HANG SENG INDEXES COMPANY LIMITED IN THE COMPUTATION OF THE INDEX; OR (iii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES, ERRORS OR INCOMPLETENESS OF ANY INFORMATION USED IN CONNECTION WITH THE COMPUTATION OF THE INDEX WHICH IS SUPPLIED BY ANY OTHER PERSON; OR (iv) FOR ANY ECONOMIC OR OTHER LOSS WHICH MAY BE DIRECTLY OR INDIRECTLY SUSTAINED BY ANY BROKER OR HOLDER OF THE POLICY OR ANY OTHER PERSON DEALING WITH THE POLICY AS A RESULT OF ANY OF THE AFORESAID, AND NO CLAIMS, ACTIONS OR LEGAL PROCEEDINGS MAY BE BROUGHT AGAINST HANG SENG INDEXES COMPANY LIMITED AND/OR HANG SENG DATA SERVICES LIMITED IN CONNECTION WITH THE POLICY IN ANY MANNER WHATSOEVER BY ANY BROKER, HOLDER OR OTHER PERSON DEALING WITH THE POLICY. Any broker, holder or other person dealing with the Policy does so therefore in full knowledge of this disclaimer and can place no reliance whatsoever on Hang Seng Indexes Company Limited and Hang Seng Data Services Limited. For the avoidance of doubt, this disclaimer does not create any contractual or quasi-contractual relationship between any broker, holder or other person and Hang Seng Indexes Company Limited and/or Hang Seng Data Services Limited and must not be construed to have created such relationship.
The S&P 500® (Standard & Poor’s 500® Composite Stock Price Index) is an index of the stock performance of 500 publicly traded companies that does not reflect the dividends payable on the underlying stocks. “Standard & Poor’s®,” “S&P 500®,” “S&P 500®,” “Standard & Poor’s 500,” and “500” are trademarks of The McGraw-Hill Companies, Inc., and have been licensed for use by Security Life of Denver Insurance Company. The Policy is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the Policy.