Equias Alliance is in the BOLI and benefit plan news often.

Why BOLI in Today's Interest Rate Environment

By David Shoemaker | September-October 2012

Banks continue to be challenged by a shrinking net interest margin as well as high liquidity. Identifying acceptable investment opportunities with high credit quality and diversification continues to challenge many banks today. In addition, most banks are affected by the increasing cost of providing employee benefits.

As we have stated before, bank-owned life insurance (BOLI), continues to be an acceptable and prevalent solution to these challenges. Pennsylvania banks continue to explore BOLI and consider the BOLI yields available today as a partial solution to these challenges. According to the FDIC and Equias Alliance research, 77 percent of Pennsylvania banks with assets greater than $100 million own BOLI assets as of June 30, 2012. In addition, highly rated insurance companies are offering very attractive BOLI yields and policy structures that many banks find acceptable for their overall portfolio strategy.

The annual yield on a BOLI investment compares favorable to other bank-eligible assets. Also, BOLI provides tax advantaged income not available with traditional bank investments. Banks earn income from the growth of the BOLI cash value and from the life insurance proceeds paid to the bank on the death of the insured employee. In addition, the income earned from BOLI is tax deferred, and, if the BOLI contract is held until the death of the insured, the bank receives life insurance proceeds tax free provided the policy complies with IRC101(j), state insurable interes laws, and has not been exchanged for value under IRC101(a)(2). Growth in cash value is recorded as "Other Non-Interest Income" on the bank's financial statements.

The bank is the owner and beneficiary of the BOLI and the policies cover the lives of bank officers who may or may not participate in any executive benefit plans. BOLI is not tied directly to the employee benefit programs, but BOLI is designed to recover a portion of the bank's overhead expenses, which includes employee benefit expenses.

Remember that BOLI must be used to offset the cost of employee benefits, including health care. Also, remember to consider the interagency guidance as outlined OCC-2004-56 regarding the purchase and administration of BOLI.

For a complementary analysis of how BOLI can impact your bottom line, or a copy of our recent ABA webinar presentation, please contact David Shoemaker, CPA/PFS, CFP, (901)754-4924 or DShoemaker@equiasalliance.com.

David Shoemaker is a registered representative of and securities are offered through ProEquities, Inc., a Registered Broker/Dealer, and member FINRA and SIPC. Equias Alliance LLC is independent of ProEquities, Inc.

Equias News

Compensation Strategies to Attract, Retain and Motivate Millennials – BankDirector
Click here to read more

Top 10 Reasons Banks Own BOLI – Joe Schaefer, MBA
Click here to read more

The Value of Customized Deferred Compensation – Bank Director
Click here to read more

Q1 2017 Equias Alliance/Michael White BOLI Holdings Report
Click here to read more

More Equias News

Current Events

PA Bankers Association | Fall Group Breakfast | October 13 | Pittsburgh Marriott North, Cranberry Township

Ohio Bankers League Joint Conv. with IL | Annual Joint Convention with ILFI | October 12 -  October 15 | Omni Grove Park Inn Resort & Spa, Asheville, NC

American Bankers Association | Annual Convention | October 15 - October 17 | Hyatt Regency Chicago, Chicago, IL

PA Bankers Association | Fall Group Breakfast | October 19 | Sheraton Harrisburg-Hershey, Harrisburg, PA

PA Bankers Association | Fall Group Breakfast | October 20 | Talamore Contry Club, Ambler, PA

Arkansas Bankers | Mega Conference | October 23 - October 24 | Little Rock Marriott, Little Rock, AR

Bank Director | Bank Compensation & Talent Conference | October 24 - October 25 | Ritz Carlton, Amelia Island, FL

More Current Events

Securities offered through ProEquities, Inc., a Registered Broker/Dealer, and member FINRA and SIPC. Equias Alliance LLC is independent of ProEquities, Inc.

ProEquities Privacy Policy

Equias Privacy Policy

butten linkedin

Consultant Login

Copyright ©2016 Equias Alliance. All rights reserved.