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Welfare Benefit Funding

Welfare Benefit Funding

MetLife's Post Retirement Benefits (PRB) solutions provide liability management and funding solutions for group term retiree life insurance and other employee welfare benefits. We provide alternatives to traditional "pay-as-you-go" financing for funding employee welfare benefit liabilities and transferring retiree life insurance liabilities.

MetLife offers a variety of financially-attractive retiree life insurance solutions which combine insurance protection and funding arrangements to help accomplish the following

  • Reduce long-term costs through tax efficiency1
  • Strengthen financial statements and flexibility
  • Enhance the ability to provide retiree life insurance
  • Reduce the administrative work associated with retiree plans
  • Solve for a variety of general employee benefit funding needs

 

Why Prefund a Liability?

Employers that offer benefits continuing into retirement are faced with a challenge — to provide programs that help employees meet their retirement goals within the practical constraints of the company, year after year. Funding retiree life insurance liabilities helps you plan for future costs on a tax-advantaged1 basis.

How Does LIFA Work?

LIFA is a convenient and flexible way for employers to prefund their retiree term life insurance liability. LIFA adds a simple amendment to an employer's MetLife group term life insurance plan to establish a reserve to prefund the cost of retiree life insurance. The LIFA program combines an analysis of an employer’s current and emerging liability, with funding schedules based on each employer’s specific liability situation. Interest crediting rates are declared in advance by MetLife and the employer makes contributions to this reserve based on the funding schedule chosen. The reserve grows tax-free1 and the assets in the reserve are used to pay retiree term life insurance premiums.

 

 

Why Transfer a Liability?

For some companies, the many changes in the corporate marketplace — business combinations, merger and acquisition activity and corporate downsizings — often leave in their wake more complex retiree benefit plans to manage and administer. For others, providing retiree benefits is essential, but the risk and administration associated with these benefits are becoming greater burdens. Still others have growing concern about the effect of shifting workforce demographics on their future benefit cash flows and the related earnings-per-share impact. For a company in any of these situations, it may make sense to effectively transfer the accounting liabilities and risk associated with its retiree life insurance plan. In doing so, employers would be able to limit their exposure to mortality, expense and investment risks and cap their out-of-pocket costs.

How Does Guaranteed LIFA Work?

Guaranteed LIFA (GLIFA) offers a way for an employer to effectively transfer its liability on a named group of retirees to MetLife. Through the GLIFA, which is a simple amendment to the employer’s group term life insurance policy, MetLife guarantees that the employer will not have to pay any additional out-of-pocket amounts beyond the premium paid for the amendment.2 The GLIFA provides a way for employers to finance their retiree life insurance obligation in a tax effective manner, cap out-of-pocket costs and transfer the liability and the plan administration to MetLife.1 In addition to these advantages, GLIFA has beneficial accounting effects, reducing the employer's expenses and establishing an asset to offset the retiree life insurance liability on the financial statements.

 

 

How Does A Funding Agreement Work?

MetLife's Funding Agreements provide a safe, convenient and flexible way to fund general employee benefits. Under MetLife's Funding Agreement, an agreed-upon amount is paid to MetLife in a lump sum or in installments. MetLife will hold these funds at a specified interest crediting rate for a specified amount of time. Principal is always guaranteed, and MetLife credits guaranteed interest at one or more specified rates, depending on the terms selected, with interest earnings reported annually and paid at maturity.2 To satisfy current cash flow needs, a portion of the funds can be kept liquid. Amounts can be held for a variety of purposes — to pay future premiums for insurance products, to fund various liabilities associated with self-insured and limited liability long-term disability plans or as an investment allocation for welfare benefit funding programs.

 

For additional information on MetLife's innovative, solution-based array of retiree life liability management products and services, please contact your MetLife Account Representative.

Post Retirement Benefits (PRB):
PostRetirementBenefits@metlife.com

Pursuant to IRS Circular 230, MetLife is providing you with the following notification: The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance products. You should seek advice based on your particular circumstances from an independent tax advisor.

1 To enjoy the tax advantages associated with this product, prefunding must be within tax code limits enacted by the Deficit Reduction Act of 1984 (or DEFRA limits), which generally limits prefunding for post retirement group term life insurance to a $50,000 maximum coverage amount over the working lives of covered employees, and actuarially determined on a level basis.

2 All guarantees are subject to the financial strength and claims-paying ability of Metropolitan Life Insurance Company.

 

 

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