educate and guide business owners through the planning process are often ... salary continuation plan in place prior to
salary continuation plans marketing materials
A disability salary continuation plan is a corporate-sponsored benefit generally designed to replace part or all of an executive’s income in the event of his or her disability. Smaller firms with active ownermanagers will be more likely to see the advantages of a salary continuation plan as a way to insure themselves and other key employees against disability, while using the tax code to their advantage. As a producer, you are positioned to make a possible multi-life, or even a Guaranteed Standard Issue (GSI) disability insurance sale.
Prospecting Email and Postcard These materials help position yourself as someone who can help answer questions about disability income insurance and salary continuation plans. Each piece can be personalized with your logo and contact information.
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Employer Flyers and Follow-Up Letter Once a prospect contacts you through general prospecting, follow-up with this flyer and letter.
salary continuation plans Think About This If you don’t have a formal salary continuation plan in place that is designed to replace part or all of a highly compensated employee’s income in the event of their disability, you may find yourself facing unwanted circumstances if disability does occur.
It’s important to keep in mind however, if a key employee were to suffer a disability and couldn’t work, and you continue their salary outside of a formal salary continuation plan, you may be setting the precedent that you don’t want within your workplace. If you pay a disabled key employee, or have in the past, the precedent will be set where a non-key employee may become disabled and expect similar treatment. Without a formal plan in place, the continued salaries to the disabled employee may also not be tax-deductible.
LOGO
sales idea
Smaller firms with active ownermanagers will be more likely to see the advantages of a salary continuation plan as a way to insure themselves and other key employees against disability, while using the tax code to their advantage. As a producer, you are positioned to make a possible multi-life or even a Guaranteed Standard Issue (GSI), disability insurance sale.
The need for disability planning is real and your efforts to educate and guide business owners through the planning process are often necessary to get them to act. A disability salary continuation plan is a corporatesponsored benefit generally designed to replace part or all of an executive’s income in the event of his or her disability. The benefit plan is generally exempt from ERISA and typically is confined to a select group of highly compensated employees. Many employers might want to continue to pay a disabled employee while he or she recovers. However, doing so without having a bona-fide salary continuation plan in place prior to the disability can create problems for the business: • The IRS could view the arrangement as a settlement and not as salary, so the business could lose the ability to claim the payment(s) as a taxdeductible expense • Without a plan, detailing the participants, the business might be subject to discrimination claims The plan is a written document that sets out the plan parameters. While it does not have to be insured, usually it makes economic sense to use insurance as the funding vehicle, and the premiums are deductible to the business. Your role is to demonstrate to business owners how and why they should develop and implement a salary continuation plan, prior to any disability occurring. You are providing valuable business planning advice, along with documents that can facilitate the design and implementation of the plan to employers and other key business strategists, such as their accountants and legal advisers.
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For Representative or Broker/Dealer use only. Not for use with clients.
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This producer brochure discusses how to demonstrate to a business owner how and why they should develop and implement a salary continuation plan.
The Need is Real The likelihood of disability may be greater than you think. Forty-three percent of all people age 40 will have a long term disability event prior to age 65.1 About half of all home foreclosures are due to disability, while extended medical costs associated with a hospital stay account for almost three-quarters of personal bankruptcies.2 Offering a salary continuation plan can provide real value to your employees.
Representative Name Agency Name Address City, State, Zip Phone, Fax Email, Website
salary continuation plans
Your key employees are one of your most important assets and can be critical to the success of your business. Offering them benefits can help reward and retain them for the long term. If you choose to offer the benefit of continuing to pay their salary if one of them becomes sick or hurt and can’t work, it’s important to have a salary continuation plan in place. This is a plan that details how an employer would or wouldn’t pay employees in the event of disability.
The salary continuation plan defines who is covered under the plan, how much is payable, the length of time benefits or continuation of wages will continue and the conditions under which the benefits or wages will be paid.
(Agent Name) is not an affiliate of Ameritas or its subsidiaries.
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what is FAS112 and how can it affect your company’s bottom line? FAS 112 affects any company following Generally Accepted Accounting Principles (GAAP) accounting that has uninsured employee benefits. Large businesses will probably not be adversely impacted by FAS 112 because they are able to spread the risk across thousands of covered employees, thus removing much of the volatility. Smaller businesses, however, should consider an insured plan that would fix the annual costs to a specific premium level, removing potentially catastrophic impacts on the company’s bottom line.
As of December 15, 1993, Financial Accounting Statement #112 (FAS 112) applies to companies following GAAP accounting rules that self insure all or portions of their disability plans. In the past, businesses were required to record only actual payments made to employees during the year. However, with FAS 112, companies must also account for benefits to be paid in subsequent years. This accounting rule applies to benefits acquired after an employee works at a company, but before that employee retires. These benefits can include severance pay, salary continuance, disability-related benefits, health care and life insurance for inactive, laid-off or disabled employees. If your company is publicly-held or has external investors, GAAP financial statements are usually required by commercial lenders. If you choose not to implement the FAS 112 effect on your financial statement, then the company’s financial results will not be in accordance with GAAP. Actuarially developed Reserve Tables, such as the 1985 Commissioner’s Individual Disability Table (CIDA) which have been endorsed by the National Association of Insurance Commissioners (NAIC) can help calculate the impact of FAS 112 on your company’s bottom line.
Age
Probability of Disability Before Age 65*
Reserve at End of 3 months
Reserve at End of 12 Months
Reserve at End of 24 Months
Reserve at End of 5 Years
30
15.0%
$77,019
$232,425
$384,687
$603,936
35
14.2%
$107,595
$327,028
$468,258
$564,912
45
12.4%
$138,422
$366,010
$449,530
$465,928
50
10.9%
$137,827
$283,426
$297,858
$211,917
This flyer outlines some salary continuation basics and gets your clients thinking about how an insured plan would benefit their business. Ameritas also provides a letter for you to include that discusses the importance of a salary continuation plan and reminds them of your meeting date.
Share this flyer with owners who intend to or already self-fund for an employee’s disability. They need to understand the impact of the FAS 112 accounting rule.
Reserve of Disability taken from 1985 CIDA (Table A at 6%). Male white-collar occupation. 90-day elimination period to age 65 benefit. Based on $5,000 monthly salary. *GenRe 2015-2016 Life and Health Fact Book [Calculations based upon 2012 Individual Disability Experience Committee (IDEC) tables]
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Additional Materials plan for your business
These materials give additional information on salary continuation plans.
The fact finder helps gather employee information required for setting up a salary continuation plan.
disability income fact finder Date:
_______________________
PERSONAL Name: _______________________________________________ Date of Birth: __________________________________________
Sex: Male
Female
Tobacco User?: Yes
No
Occupation (including specific duties): _______________________________________________________________________ ________________________________________________________________________________________________________ Elimination period desired: ______________________________
Benefit period desired: ___________________________
SELF EMPLOYED
NON SELF EMPLOYED
Gross Business Income: ________________________________
Salary: ________________________________________
– Business Expenses: _________________________________ + Other Earned Income: ________________________________
+ Bonus: ______________________________________ + Other Earned Income: _________________________
Pension Contribution: ____________________________________________________________________________________ Unearned Income Over $20,000: ___________________________________________________________________________ Resident State: ________________________________________ State of Employment: __________________________________ State Cash Sickness: Yes Existing Coverage: LTD
No
STD
Sick Pay
Contract State: _________________________________ Eligible for Social Security: Yes
Individual
No
Details of Existing Coverage: ______________________________________________________________________________ ________________________________________________________________________________________________________
This brochure provides more detailed information about salary continuation plans. disability salary continuation plan For Business Owners
Ameritas Life Insurance Corp. Ameritas Life Insurance Corp. of New York ADV 1057 12-13
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INDIVIDUAL FINANCIAL NEEDS ANALYSIS
Sample salary continuation plans and corporate resolution forms are available for you to share with the business and their legal advisors to aid in drafting the plan.
EXPENSES
Monthly Amount
Rent/Mortgage:
$ _____________________________________________
Food:
$ _____________________________________________
Utilities (water, heat, electricity, phone):
$ _____________________________________________
Transportation (car payments, maintenance, repairs, insurance, gasoline):
$ _____________________________________________
Installment Payments (credit cards, loans):
$ _____________________________________________
Insurance Premiums (life, health, car, medical):
$ _____________________________________________
Total Monthly Expenses:
$ _____________________________________________
INCOME
Monthly Amount
Current Disability Benefits (group, individual, association):
$ _____________________________________________
Other Benefits (Social Security, Workman’s Compensation, veteran’s compensation, etc.):
$ _____________________________________________
Other Income Sources:
$ _____________________________________________
Total Monthly Income:
$ _____________________________________________
For How Long?
Waiting Period
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This information is provided by Ameritas®, which is a marketing name for subsidiaries of Ameritas Mutual Holding Company, including, but not limited to, Ameritas Life Insurance Corp., Ameritas Life Insurance Corp. of New York and Ameritas Investment Corp., member FINRA/SIPC. Ameritas Life Insurance Corp. is not licensed in New York. Each company is solely responsible for its own financial condition and contractual obligations. For more information about Ameritas®, visit ameritas.com. Ameritas® and the bison design are registered service marks of Ameritas Life Insurance Corp. Fulfilling life® is a registered service mark of Ameritas Holding Company. © 2015 Ameritas Mutual Holding Company
For producer use only. Not for use with clients.
