A Whole New Way of Thinking about - Funding Corporate Benefits
Risks and Rewards
Risks
The ABIL PlanTM, at its core, is a funding strategy for employee benefits and executive compensation arrangements. As with any funding strategy there are risks as well as rewards.
The ABIL PlanTM is not free insurance. While the strategy may show no out-of-pocket costs, that does not mean there will never be a need to pay something.
Although IBG-BMC and NIW strive to analyze and anticipate policy performance along with interest rate fluctuations, we cannot guarantee positive outcomes each year. ABILTM is a long term strategy typically taking 15-20 years to achieve its intended results.
In order to obtain the most favorable loan rates from lenders, the loan needs to be fully secured. In other words, if the policy cash surrender value is insufficient to fully secure the loan, then outside supplemental collateral is required. In rare cases interest may have to be paid out-of-pocket by the client.
The interest roll-up design is one way to reduce a client’s costs and mitigate risk. As long as appropriate design assumptions and realistic interest rate forecasting are used at the onset, the insurance product’s cash value should, on average, grow at a higher rate than the loan. Clients should be wary of strategies that use flat line loan interest rate forecasts, as they could be hiding a high profit margin for the lender by erroneously assuming a low underlying borrowing rate. The foregoing is not intended as a complete risk disclosure. Full disclosure is made during the client evaluation due diligence process as well as at transaction closing.
Rewards
The ABIL PlanTM is premised upon fundamentally sound economic analysis which will be made available to clients and their advisors during the due diligence process. For the appropriate client who has a long term (15-20 years) time horizon the Rewards can be significant.
Governments & Corporations
For governments or private sector employers seeking to fund their under funded pension or OPEB liabilities ABILTM can assist in fully funding in as little as 15-20 years - far less than the 30 years prescribed under FASB and GASB accounting statements. Moreover, unlike bonds, The ABIL PlanTM does not result in the posting of a balance sheet liability.
Private Business
For the owners of closely held businesses The ABIL PlanTM provides a vehicle for transferring the business to a second generation without causing estate tax liquidity issues.
Professional Practices
For partners in law firms, medical practices or other professional firms, The ABIL PlanTM provides a source of revenue for redeeming the shares of retiring members.
Unions
For Unions and those employees operating under a collective bargaining agreement, The ABIL PlanTM can be the solution which allows current and future employee benefits to be continued without a reduction in benefits or loss of jobs.
“A man would do nothing, if he waited until he could do it so well that no one would find fault with what he has done.”
Cardinal Newman
