Supplemental Benefit/COLI Programs

A RETIREMENT PLAN OPTION THAT IS GAINING POPULARITY IN THE PUBLIC SECTOR IS A DEFERRED COMPENSATION PLAN CALLED THE CORPORATE OWNED LIFE INSURANCE PLAN, OR COLI. Corporate Owned Life Insurance is an attractive investment alternative for non-qualified benefits because it allows the company to accumulate an asset on a tax-deferred basis. Companies can establish programs that allow the investment performance of the funding to loosely match the investment allocation selected by participants by using variable life insurance products.

A key issue of concern to many companies offering a COLI plan is whether or not the participants' investment choices are balanced to minimize tracking error. If their fund options do not closely mirror the returns offered within the COLI, an asset/liability mismatch can occur. One common source of tracking error is company stock, which is difficult to shadow with a mutual fund. If the unfounded liability grows too large, management is faced with the prospect of making contributions to "true up" the balancing act.

DeMarche specializes in helping its clients understand the expected performance characteristics of different manager styles and the funds they manage. DeMarche can assist in optimizing the funds on each side of your COLI program to minimize tracking error and, therefore, an underfunded status requiring added contribution. This includes evaluating performance versus appropriate benchmarks and peer groups. DeMarche has a family of factor-models that help identify style drift in portfolios. DeMarche has the ability to closely examine the actual holdings in fund and evaluate overlap. Through a partnership with William Lynch & Associates, a leading insurance consulting firm, DeMarche can provide custom solutions to hedging company stock and determining if you insurance provider is "best of class."

For more information on how DeMarche can help you keep your best employees happy and minimize costs for your firm, contact us.