Bank-owned life insurance (BOLI) is used as a tax-efficient method for offsetting the costs of employee benefit programs.  The cash value grows tax-deferred, allowing banks to book annual increases in cash surrender value as tax-deferred “other income.” The initial premiums paid, the previously deferred gains in cash value, as well as proceeds from death benefits are all paid out on a tax-advantaged basis.  At the same time, bank management teams find the risks of BOLI investments within the standard business risks of a bank’s investment portfolio.

Pinnacle’s BOLI services can be broken into three categories: consulting, compliance, and administration, and these services provide an end to end solution for banks.

Consulting and sound advice are critical to an effective BOLI program.  Upon initial engagement, our consultants gain an understanding of existing executive retirement plans and other obligations financed with BOLI.  We also verify and clarify a bank’s philosophy regarding benefits, which oftentimes entails management and board interviews to gauge business objectives as well as peer benchmarking. Based on our experience and knowledge, as well as a thorough understanding of your objectives and financial constraints, we help you determine the BOLI program that best meets your objectives.

As heavily regulated institutions, banks must have confidence that their BOLI programs are operating in compliance with applicable laws and regulations.  Prior to implementing a BOLI program, our consultants conduct a pre-purchase analysis of the BOLI program as a risk assessment tool.  Once a program is implemented, our consultants, in concert with other bank vendors, assist the financial institution with the documentation that is required by these guidelines, including cash value reporting, documentation for regulatory requests, and appropriate materials for board meetings.  The documentation provides assurance to regulators and bank management that the BOLI program is appropriate and prudent.

Finally, with other trusted industry partners, Pinnacle consultants oversee the seamless administration of a BOLI program.  Our oversight and coordination services cover all aspects of administration, including implementation, periodic benefit plan and policy reports, as well as comprehensive annual reviews.