Advanced Markets Minute: The Tax-Advantaged Retirement Income Plan

Most business owners would like to provide a retirement benefit to their employees, but many times they worry about the administration requirements, the contribution limits, the plan costs and the ongoing responsibility of starting a retirement plan.

What if you could provide a solution that allowed your client to provide a tax advantaged income stream in retirement for their employees, with little to no administrative requirements, the flexibility to choose which employees will participate, along with when and how much will be contributed to the plan? Do you think your business owner clients would be interested in offering a benefit with this kind of flexibility, not to mention the tax-advantaged benefits it has to offer to their employees?

An agent in Pennsylvania recently discussed a similar client need with Advanced Markets. Her client was a doctor who owned a small practice employing 10 individuals. He wanted to provide a benefit to some of his employees and was interested in starting and contributing to a retirement plan as a retention tool, but didn’t want to worry about discrimination testing, administration fees, contribution/income limits, and also wanted the flexibility to stop contributions if the office experienced a “down year.” What resulted from her discussion was an opportunity for her to discuss using cash value life insurance to meet and exceed her client’s needs.

He could “contribute” premiums to a life insurance plan for a select group of employees, using cash value life insurance with the potential to provide the employees income during retirement. The premiums would be tax deductible to the business and taxable at ordinary income levels as a bonus to the employee. The employer could choose to provide an additional bonus to cover the employee’s additional income taxes caused by the bonus. The employee would receive the benefit of owning a life insurance policy with an income tax free death benefit to protect their family in the early years when income replacement is so critical, along with the ability to build cash value to help supplement their retirement income in the future

The producer illustrated Income Advantage IUL for her client and his selected employees, with annual premium ranging from $10k to $50k per year. The client loved the concept and the IUL illustrations, and started with purchasing two policies, each over $1 million face amount. He liked the fact that he didn’t have to worry about contribution or income limits, or whether or not he was contributing the same for all employees. He liked the fact that the policy was flexible and would allow for tax advantaged loan distributions during retirement, all while protecting their loved ones with a tax-free death benefit. (Note: Loans and withdrawals will lower the death benefit.)

If you have business owner clients who would like to create the opportunity of tax advantaged income in retirement for their employees, without the typical retirement plan costs and administrative hassles, consider discussing Income Advantage IUL and the tax advantaged benefits it has to offer.

Contact those in Mutual of Omaha’s Advanced Markets if you need help: 1-800-693-6083 or email

Advanced Markets Minute: The Tax-Advantaged Retirement Income Plan