BOLI (Bank Owned Life Insurance)
General Executive Compensation Consulting

BOLI (Bank Owned Life Insurance):

BOLI Services:
Consulting. The key component of our process is to identify the purpose of the BOLI holding and insure that assets held are in alignment with the goals and objectives of the bank management.

Compliance.  FCG professionals have been working in the BOLI market before the initial regulatory guidelines were issued in 1991.  We work with our clients in the risk analysis for both pre-purchase and post-purchase.  We provide a detailed risk and performance review annually as part of the compliance requirements (OCC Interagency Bulletin 2004-56).

Asset Management.  When variable BOLI products are used, we use The Newport Group’s BOLI Program Diagnostic to select and evaluate the BOLI portfolio mix and performance.

Administration.  Our administrative services are handled by experienced CPAs who provide the program reports on a timely basis.  The administration includes the annual asset and liability accounting (executive plans), as well as annual regulatory compliance reporting.

BOLI Consulting Services:
BOLI Portfolio Analysis: Performance analysis, Interest rate benchmarking, policy expense analysis, assessment and recommendations

Administrative & Compliance Analysis: Qualitative reporting, compliance review (regulatory, legal, and accounting), competitive benchmarking, capital analysis

Product & Carrier Analysis:  Product type summary, carrier credit risk and financial strength, rating changes update

Separate Account & Stable Account Analysis:  Investment policy statement review, asset allocation review, investment manager analysis, stable value contract & term sheet review, carrier representation & warranty, wrap provider review, and accounting analysis

Executive & Director Plan Review:  Proper accounting compliance, discount rates, payroll reporting, tax compliance (plan design and operation), and liability risk analysis

BOLI Compliance Overview:
Regulatory guidelines require that banks complete a through analysis of a contemplated BOLI purchase prior to the purchase, as well as an ongoing review and due diligence of the holdings to ensure continued compliance throughout the period that the BOLI assets are held by the bank.

Our Compliance services assist the bank management in all aspects of the
compliance process including:

• A pre-purchase analysis of all BOLI assets acquired by the bank in conformity with the regulatory guidelines
• Documentation of the pre-purchase analysis
• Continued compliance with regulatory and tax rules after the purchase

BOLI Compliance - Pre-Purchase Analysis:
Regulatory guidelines require that banks satisfy each of the specific steps prior to the purchase of BOLI.

• Indentify the need for insurance, determine the economic benefits, and document the selection of the appropriate type of life insurance product
• Quantify the amount of insurance appropriate for the bank’s objectives
• Assess vendor qualifications
• Review the characteristics of the available insurance products
• Select the carrier or carriers
• If the insurance results in additional compensation to the insured employee/ director determine that the compensation is reasonable
• Analyze the risks of the BOLI purchase and the ability of the bank to monitor those risks
• Evaluate alternatives
• Document decision

Compliance – Ongoing Reporting:
Regulatory guidelines require that banks continue to monitor the BOLI asset and
associated risks after the purchase.  A compliance set of reports that address the tax,
accounting, and compliance reporting are provided;

• Calculation and reporting of executive/ director benefit in accordance with proper accounting practices (FASB 106 and 87)
• Report BOLI asset values in accordance with accounting and tax requirements (Form 8925) added by the Pension Protection Act of 2006
• BOLI review for performance, risk, and compliance (OCC Interagency Bulletin 2004-56)

 

BOLI Implementation and Design:
During the implementation and design phase, the professionals of FCG will assist in
the design, prepare the documents and analysis of any executive or director benefit
plan.  The staff will also guide the bank through each step of the implementation
process:

• Implementation meeting.  The introductory meeting with bank management/ directors to identify objectives, review the compliance requirements (Pre-Purchase Analysis), and a timeline for the process
• Meeting with officers (if new benefit plan is being implemented).
• Underwriting.  The FCG staff will prepare and deliver the necessary paperwork and forms to place the BOLI policies
• Draft and deliver the bank’s BOLI Policy & Procedures and documentation of the Pre-Purchase Analysis
• Set up accounting and administration files for FASB compliant accounting for assets and liabilities associated with the benefit plans and BOLI purchase

FCG BOLI & Deferred Compensation Administration

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