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Bank Owned Life Insurance

Banks, credit unions, and corporate clients require a level of planning that will help them balance their assets while attracting, retaining, and rewarding top‐tier talent to contribute to growth and profitability. Finding the right balance is critical, and with firsthand knowledge of the most current products and product costs, we aim to provide our clients with the most cost‐effective and efficient strategies to accomplish their needs at a level they are comfortable with.

Bank Owned Life Insurance (BOLI) and Corporate Owned Life Insurance (COLI) plans are generally described as life insurance that a bank or corporation owns or has interest in. BOLI and COLI plans are used by financial institutions and companies to offset either a specific executive benefit plan (i.e. a split dollar plan or SERP) or to fund all employee benefit plans in aggregate. For either purpose, life insurance when held to maturity offers the most efficient way to fund these liabilities as BOLI provides an attractive tax‐equivalent yield to help offset the ever‐rising costs of employee benefits.

BOLI is the most popular funding tool utilized by banks to fund employee benefit plans, with more than half of the financial institutions in the country owning BOLI on their balance sheets. It is not uncommon for banks to invest 10% ‐ 25% of their Tier 1 Capital in BOLI. BOLI is a permissible asset under OCC Bulletin 2004‐56. This Bulletin provides extensive pre-purchase and post-purchase guidance to mitigate risks associated with this purchase.

While BOLI is an effective financing tool to offset employee benefit costs and provides incremental income to a bank’s bottom line, it also can also provide benefits to retain and reward key executives and directors. For example, the death proceeds from the life insurance can be shared with executives to designate to their own beneficiaries, thereby giving a significant benefit to your executives.

BOLI and COLI plans are long‐term assets that require rigorous upfront and ongoing due diligence. GFG is proud to partner with M Benefit Solutions to provide clients with the required implementation and ongoing administration. With more than 30 years of administration experience, M Benefit Solutions is the preferred BOLI service provider for the Independent Community Bankers of America.

GFG is proud to work with banks, credit unions, and companies in their implementation of BOLI and COLI plans.