Most employers look for tax-efficient ways to fund their employee benefit programs. A common way to accomplish this objective is through COLI / BOLI products. In a COLI / BOLI program, a corporation or bank purchases life insurance on a group of key employees. The corporation/bank pays the premiums, owns the cash value of the policies, and is the designated beneficiary. Each participant employee must consent to the corporation/bank owning an insurance policy on his or her life and must be notified about the maximum amount of coverage and the beneficiary designation.
COLI / BOLI offers the following benefits to employers:
- COLI / BOLI can be used as a source of funds to help support deferred compensation and
other post-retirement programs.
- BOLI can be a source of funds that potentially offers annual after-tax returns that are higher
than the returns earned on bank investments.
- Policy earnings may come from growth in the account value each year and from life insurance
proceeds when an employee dies.
- Policy earnings are tax-deferred until accessed.
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