When it comes to compensation plans, there are a large variety of options in the financial sector. Supplemental Executive Retirement Plans (SERPs), your classic 401(k)… But have you heard of LINQS+? What about Titanium? The two are both expense plans for credit unions, crafted by Newcleus’ financial professionals and advisors. So, let’s discuss: LINQs+ vs. Titanium — What’s the Difference?

What is LINQS+?

A proprietary innovation to the traditional SERP product, LINQS+ is Newcleus’ Lifetime Income Non-Qualified Solution. With LINQS+, the involved financial institution purchases an insurance company guarantee to make the lifetime benefit payments. The insurance company takes on the longevity, investment, and interest rate risk while the financial institution carries the asset as an investment on the balance sheet, earning interest at the current market rates.

LINQS+ combines the best of a traditional SERP with a mechanism to enhance executive retention and reduce the cost of the benefits for the financial institution. Unlike Titanium, however, LINQS+ must be paid upfront by the credit union whereas Titanium is spread over ten to 15 years.

To illustrate, let’s say an executive is to receive $100K annually for 15 years under a traditional SERP. The cost of the plan totals $1,500,000 (100K x 15). With LINQS+ alternatively, an investment of $800K will provide a guaranteed lifetime benefit stream of the same $100K annually. The financial impact is a positive savings of $700K for the financial institution, and the executive receives an enhanced lifetime benefit, which would equal $2,100,000 based on expected mortality.

To clarify, LINQS+ is not life insurance. If properly structured, however, LINQS+ and Bank-Owned Life Insurance (BOLI) are complements to one another. BOLI policies provide earnings to offset the cost of the benefit plans and protect against premature death through the insurance aspect of the policy. LINQS+, on the other hand, protects executives and financial institutions from longevity risk. LINQS+ reduces the cost of the benefits with the actual design specifically addressing the liability expense.

Using LINQS+, Newcleus can offer a lifetime benefit at a lower cost than anywhere else. Compared to Titanium, LINQS+ is considered more conservative as it’s guaranteed money for life. For this reason, LINQS+ is a leader in retaining employees. It identifies a product in the marketplace that provides a guaranteed payment, beginning at a specific age and pay for life. When it comes to LINQS+, you cannot outlive this benefit, which is why it’s so appealing.

What is Titanium?

People are used to hearing SERP, split-dollar, BOLI, CUOLI, but Titanium? Not so much. Titanium is an industry first in executive compensation. A non-qualified deferred compensation plan alternative, Newcleus’ Titanium is a new strategy that utilizes an insurance product booked as an asset by the employer, and at the participant’s retirement date provides for cost recovery. Unlike a typical deferred compensation plan, there is no GAAP accrual to book.

Titanium is available exclusively to Newcleus’ clients, providing unique benefits for both employer and plan participant. The participant will benefit from tax-free retirement income and death benefit protection for their heirs, all with post-retirement bankruptcy protection against the employer.

This deferred compensation plan alternative is an effective strategy to provide retirement income and death benefits to key executives with minimal investment and credit risk compared to other non-qualified programs. In addition, Titanium is not subject to IRC Section 409A while avoiding ERISA and Regulation O. 

Because of this, Titanium can be attractive for banks, credit unions, and non-financial companies. For the participant, Titanium’s unique strategy provides retirement income that vests over time with death benefit protection starting at the implementation of the plan. Once the participant retires, they have a fully vested insurance product that is not subject to creditors of their employer. This is not typically the case with non-qualified deferred compensation.

In creating Titanium, we at Newcleus worked to create a structure that incorporates all the best elements of various deferred compensation plans. Titanium is elegant, easy to administer, flexible, and useful to executives while limiting risk for its sponsoring organization. In fact, Titanium reduces or minimizes, if not eliminates, a majority of the risk in the split-dollar plans that are not widely considered.

Additionally, Titanium:

• Preserves the tax deficiency
• Allow executives the flexibility to take money from the plan (i.e. having the ability to use the asset as they see fit within its parameters)
• Preserves efficiency of withdrawal from the plan (i.e. not getting hit with income taxes left and right)
• Sets a time frame so as that they won’t be affiliated with the credit union for years thereafter

Additionally, the participant is in full control of their plan and has no post-retirement anxieties as to employer performance, solvency, change in heart of future management, or future acquisition.

Have Additional Questions?

At Newcleus, we combine decades of experience to redefine what’s possible in designing and administering the best compensation, benefits, investment, and financing strategies.

Our team is wholly dedicated to creating and implementing competitive compensation and benefits packages that will attract and fully engage the best possible leadership team—including LINQS+ and Titanium. Contact us today to learn more about how either of these plans can help your company and those that power it.