alternative funding for
employee benefits and compensation plans
A form of life insurance purchased by banks where the bank is the owner and beneficiary of the policy.
Bank-Owned Life Insurance (BOLI) is an allowable transaction under the BOLI Interagency Statements on the purchase and risk management of life insurance, and its business purpose is defined as financing employee benefit liabilities/costs. A BOLI policy’s initial cash value is 100% of the premium paid. Inside build-up of the policy’s cash value is tax-deferred and death benefit proceeds are received tax-free.
- A BOLI plan must include all bank officers on a non-discriminatory basis
- If a life insurance carrier is more highly rated, it must offer banks lower interest rates
- All BOLI carriers offer generally similar BOLI products and investment portfolios
- BOLI is an illiquid asset that the bank cannot get rid of
- All BOLI producer groups provide the same level of service and support
BOLI enables banks to generate tax-advantaged income to offset and recover the costs of employee benefit plans, including healthcare, group term life insurance, retirement benefits, deferred compensation, and more.
It generates stable revenue from non-loan sources and enhances the Other Non-Interest Income component of the income statement. BOLI also provides competitive returns with superior credit quality and increases earnings per share (EPS) and shareholder value.
In today’s marketplace, BOLI policies are designed to reduce the policy owner’s interest rate and mark-to-market risk allowing for steady policy growth. Beyond that, BOLI allows the bank to share a portion of the returns with key executives, allowing for competitive recruitment and retention.
Newcleus’ full-range of BOLI services (included at no additional charge)
- Social Security Sweeps*
- Peer Group Analysis
- Concentration and Lending Limit Analysis
- Review of Carrier Financials
- Review of Carrier Ratings
- Comparative Carrier Analysis
- BOLI Insurance Policies
- Employee Consent Forms
- Carrier Anual Reports
- Carrier Statements
- Trust Documents
- Plan Legal Agreements
- Plan Forms, Such As Beneficiary Designations and Election Forms
- Carrier Ratings and Financials
- Carrier and Insurance News
- Industry and Market Compliance Issues